Budgeting Tips For Young Adults
As a young adult, what do you think about when you hear the word budget? When I was a young adult, and even now, I cringe when I hear the word. For some reason, it has a bad connotation associated with it. Similar to pineapple and pizza – it just has a bad ring to it!
All joking aside, the word budget has received a bad rap. Budgets are what you make of them. They can either be restrictive and difficult to live with, or they can be freeing and make your personal finances much less stressful. It’s really what you make it and the mindset you start with.
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The Truth About Budgets
Let me give you the down and dirty about budgets. Budgets are a plan for your money. A plan that you create to tell your money where you want it to go. Do you want to spend all your money on video games and makeup? You certainly can do that with a budget geared towards those purchases. As fun as that may sound, it’s probably a bad idea unless you plan to live in your parent’s basement for the rest of your life.
I know you are young, but think about where you want to be in 10, or even 20 years. What do you want to accomplish in this life? Money gives you the ability to accomplish just about anything. Without money, life is much more difficult.
Look at your friends who are broke. Maybe you are in this position. Where does all their money go? One word – junk. They buy a bunch of stuff that they wanted at the time and now could not care less about. Perhaps they go to taco bell or the mall way too often. I know fast food is convenient but come on, do you really enjoy working your butt off only to give your money away for tacos? What if you start to associate your money with the amount of work you had to do to get it? If you make close to minimum wage, you worked an entire hour just for a few tacos.
Start to value your time in relation to your money. That 50 dollar purchase was a lot of time at work! Is it really worth it?
Simple Steps To A Budget
If you want to have plenty of money at the end of the month and have the freedom to spend your money on meaningful things, congratulations! It’s not rocket science, it takes a plan and the willpower to stick to it.
Step One – How Much Money Do You Make?
The concept of a budget is to identify, as close as you can, the amount of money you bring in each month. When you have a general number, that is your starting point. You can not spend more than that each month, and I would strongly suggest you spend much less.
What brings value to your life? Where do you want to be in 10-20 years? This is where it all begins. You can either be a millionaire when you’re older, or you can be broke and stressed. It’s all up to you.
Step Two – Where Does Your Money Go?
After you have your total income number, write down all the expenses you have to pay for each month. These items may be a car loan, gas, insurance, food, student loans, haircuts, nail appointments, entertainment such as movies, and on and on.
An easier way to do this is to look over your last month’s bank statement. Look at all your purchases and see where your money went. All of your money. Put everything into a separate category so you can see exactly how much you spent and where it went.
We found out that using the envelope cash system, you can take better control of your spending. It is tough to part with cash versus swiping your cards.
Step Three – Compare your income to your expenses
Next, look at your total going out compared to the total coming in. Hopefully it is much less than your income, otherwise, you have some serious cutting to do!
By doing this, I’m sure you identified several areas of complete waste. Who knew you went to In-N-Out Burger that much! Look at your spending and decide, right now, what is a reasonable amount to spend on those things. Maybe in some areas, it’s zero. It’s certainly acceptable to refuse to spend any more money on junk. Seriously, look in your closet! How many clothes have you bought that you never wear?
here are over 100 ways for you to save money . In that post, you will be overloaded with money saving tips, that you won’t know what to do with yourself.
Step Four – Start Cutting!
As you look over your budget and start cutting things out, I strongly encourage you to set a separate section in your budget titled, “Savings”. If your car breaks down and you are living paycheck to paycheck, how are you going to pay for the repairs? Your savings is your emergency net (awesome post on how to save your first $1,000 emergency fund). If you haven’t figured this out by now, life happens when you’re not ready for it. A savings account prepares you for the unexpected. Don’t let unexpected money problems sneak up on you!
Step Five – Becoming Rich!
The more you practice with this budget, each month, the easier it will get. If you can properly budget your money, and save at the same time, you will be a millionaire by the time you’re 50 (if not sooner).
To reach this millionaire status, in addition to your saving, you also need to invest. I am not going to get into the investment part right now because Dr. Breathe Easy Finance has other great articles on this topic, such as Pretax vs After Tax Investments and 4 Best Investing Ideas For Beginners To Retire Early
In closing, I want to reiterate that a budget is what you make it. Your parents are no longer telling you what to do with your money, it’s now all up to you. I encourage you to take control of your spending and spend your money on things that bring value to your life. We certainly don’t want your parents coming back and saying, “I told you so” when you ask to move back in with them.
Just because everyone else is broke, doesn’t mean you have to be. There are so many of us out here that have little to no financial stress because we have figured out this thing called money. Keep reading and learning as much as you can about money so you can control it, rather than it controlling you! You can do this, and Dr. Breathe Easy and I will be right here to cheer you on!
There you go, young adults. Even, if you are not a young adult, I am sure you found value in the post.
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