Managing Your Financial Expenses in the USA

Essay and graphic by Sami Aladalah

Moving to USA is a big change. One of the changes that I am concerned about is the change of a life style related to managing a person’s financial budget. New arrivals don’t have to suffer or get into many commitments that they will be obligated to meet in the future. Whether you are a full time student or a part time student, fully funded by a scholarship or self-sponsored, planning your budget carefully and wisely could result in a wonderful stay in the USA.

The first step of planning your financial expenses is making a monthly financial budget where you can estimate your monthly financial incoming and outgoing money. I would recommend using an Excel file or a similar application due to its mathematical built-in solutions such as totals, adding, subtracting, changes by percentages and many other different arithmetic transactions to make it an easy process. The financial budget would be prepared as follows:

There are two aspects of the financial budget: the incoming, which means the income you are expecting to receive, and the outgoing, which are the expenses that you will spend. All of the budgeted elements should be written in one column- please refer to the picture at the end of this article to have a better idea- to reach the net (differences between income and expenses). So first list the budgeted income, such as a fixed monthly salary, in addition to any other expected income that you might be getting for a certain month. Then you will have a total income for the month by adding the two or more of above components. In case you don’t have a monthly income and you have a bank balance for your whole stay, then you could skip this part for the income, but be sure that you plan your expenses carefully to manage your whole stay in the USA. For example, your bank balance should cover your monthly expenses budget for the months you are staying in USA with some emergency budgeted expenses such as an additional 10% to 20% of your whole stay budget.

Secondly, below the total income, you will prepare a monthly expenses budget by having expenses components separate in each row as follows: rent expense, utilities separately (water, electricity, and internet), monthly tuition, groceries expenses, dinning at restaurants, transportation, laundry, purchases (such as cloths), entertainment, books, medical expenses, any other known monthly expenses and other expenses (for unexpected expenses). Then you will reach a total of monthly budgeted expenses. This total amount will be deducted from the monthly budgeted income. The result should be a zero or a debt balance (plus sign) in the budgeted column.

Third, you will make another column next to the budgeted column named “actual” where you will list against each element the actual income received and expenses spent. The third column will be named differences that will be prepared by deducting actual expenses from budgeted expense. This where your planning accuracy and commitment to your budget will show. Of course, the idea of the financial budget is not to be so strict that you will not differ at any time. Expected that emergencies and inaccurate planning will happen and that you will have to adjust your budget accordingly to be reasonable based on your living style and your income.

In this regards, the whole goal of preparing your monthly budget is two main things: first, not to have any surprises and spend over your income and be in a stressful situation (debt) and second, to monitor you actual expenses against your budgeted expenses throughout the month to know where you stand and when should you spend less not to exceed the budget. This monitoring could be on a weekly basis. In this way you can skip some of the unnecessary expenses if you have already spent a lot compared to the budget like skipping dining out or entertainment. On the other hand, if you are below budget, you can treat yourself with whatever you wish to spend. Also, remember the economic principle ‘the opportunity cost’ which could be applied to decision making for expenses spending, in which any spending on an option is a missed opportunity for another option. In other words, let us say that you have an opportunity to renting an apartment for USD $1000 and another option is to rent another apartment for USD$ 600, so the missed opportunity for renting apartment #1 is USD$ 400 monthly which will be over 10 months USD$ 4000 that could be spent on other things if apartment #2 is rented. Again, all aspects should be considered, and it differs from one person to another, but it is always better to have all the information in mind before making your decision.