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Improving Financial Literacy: Budgeting 101

Friday, February 6 2015 12:00am

Introducing a new weekly feature: Financial literacy advice from Mr. Harry Greenfield, the Robert and Rene Glidden Visiting Professor at the College of Business. Topics will include credit basics, understanding loans, debt management, the importance of saving and more.

Tags: Finance

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YOUR WALLET — One of the first (and most crucial) steps toward becoming more financially literate is understanding the importance of budgeting. It’s a simple act that, with dedication, can make a significant difference.

You budget so that you know how much you have for discretionary spending.  It also helps you establish savings and retirement goals.

  1. Gather together all of your credit card and checking statements for an entire year and put them in a spreadsheet.
  2. Take out all the outliers, which are expenses and incomes that are not constant. A good example of this is tuition or workplace reimbursements. If you bought something for work in February, but weren’t reimbursed until March, then it appears that February was “worse,” while March was “better." This kind of fluctuation in your budget isn't constant, like a rent payment is, so don't factor those into finding your base cost of living.
  3. Figure out your normal expenses for the following: Housing, utilities, transportation, entertainment, and credit card and/or student loans. (Other examples of monthly factors to consider may include health care and child care, if applicable.)
  4. Remember to pay yourself first.  A good rule of thumb is to budget 10% of your net income toward savings and retirement.

 Now that you know how much it costs you to live each month, compare that total with your income. Hopefully, your cost of living is lower than your income. If not, look for places to save money. If your budget isn’t balanced, think about ways to reduce your spending and increase your income.

Look at it this way. If every day on your walk to class, you stop at the coffee shop and get yourself a $4 latte, that becomes $20 in lattes a week, and $88 in lattes a month. Spending on cigarettes, fast food or restaurant meals, and the cost of gas and parking also add up. Consider what is a need and what is a want so you can work toward achieving financial independence.

Knowing how much it costs you to live gives you an idea of what kind of future salary to negotiate. If you take a $40,000 job, but have a $50,000 lifestyle, you’re going to need to find that $10,000 difference. Your career may be your future, but your fiscal responsibility starts now.


Mr. Harry Greenfield is the Robert and Rene Glidden Visiting Professor in the College of Business. He is teaching Accounting 4900 this semester, a course he styles as “Alternative Careers for Accountants.” A practicing lawyer for over 45 years, Greenfield teaches bankruptcy law at Cleveland State University.


 UPCOMING EVENT: Mr. Greenfield will be sharing more of his financial literacy tips Monday, February 16 at 7 p.m. in Baker Theater. This event is open to the public. Click here for more information.