Budgeting Skills For Young Adults
Finances are something not talked about enough when you're a younger adult. This is an extremely important subject and should be taught more. No worries though, that's why we wrote this article, just for you! Let's start talking about budgeting.
Start A Spreadsheet
Don’t worry, you don’t need Microsoft Office and Excel to start a spreadsheet. Google offers a free cloud-based office suite, with any Gmail account. It comes with Google Docs, Google Slides, and Google Sheets. Google Sheets functions almost exactly as Excell, so there isn’t much of a learning curve for Excel users. If you’ve never used either, it’s really not that hard.
There are pre-made budget templates available online. I find them overly complicated and time-consuming, but they may work for you. Personally, I just make my own, so here’s a link to one I made in just 15 minutes. All I did was make a list of my expenses, added them up and subtracted against my monthly income. I duplicated the sheet 12 times, and voila, I have a budget plan for the year!
Now, as you’re income begins to diversify, you can add interest rates from savings accounts or dividend yield stocks. It requires some more complicated functions, but not overly so, and over time your spreadsheet will diversify. The beauty of a digital spreadsheet is if programmed correctly, all the math is done for you, so if any changes occur to your expenses or income, just plug it in, and the results will distribute correctly.
Why Do You Want To Save?
I didn’t put this first, because I think everyone should have a budget spreadsheet regardless. Even if for some reason you wanted to save no money, the spreadsheet could still help you break even.
But of course, you want to save money for the future, so the next step is determining why. Whether it's it for travel, financial security, emergency fund, buying a car, or paying off student loans - it’s more than likely a combination of all those things, but if you don’t determine what it is, you can’t formulate a plan to get there - So start with that!
Examine Your Spending Habits
So you have a goal in mind with a steady income and a ton of moxie. You’re ready to seize your goals by force, but your bank account isn’t growing. It’s time to look at your spending habits and what you can change about them.
Unfortunately, some of your monthly expenses, like your rent and car insurance, are constant, but others, like food and entertainment can vary wildly. Look at your card statements and receipts to see where your money is going. Theoretically, you could eat rice and beans for every meal and drink nothing but water, upping your savings exponentially. I would advise you to balance your budget goals with quality of life needs, especially if you're in college trying to save money. Even if it takes a little longer, planning for the future with no regard for the present can lead to a miserable existence. So don’t be afraid to have fun, just please try to curb the impulse to go out every weekend and buy a round of drinks for everyone.
Besides, there are plenty of other savings to be made be if you take the time to examine your spending. Your utilities can be reduced by taking shorter showers and turning off the lights when you’re not using them. And you’ll be surprised how much money is spent on miscellaneous purchases, that served no purpose except they caught your eye.
I had a bad habit of buying snacks and drinks every time I went to get gas. What should have been a 20 dollar expense, could easily be a 30 dollar expense, without much thought. Once I made a little effort to curb the impulse, I had an extra 20-30 saved every month. You will be surprised at how many pointless purchases you make every month and how easy it is to stop.
A few times in this passage, I mentioned reviewing your statements and receipts. If you are not recording your expenses, start immediately. There are plenty of free apps that make it easy, and I find taking the time to input the cost of an item makes me think twice about purchasing it.
Don’t Be Discouraged by Setbacks
No matter how much you plan, things will go wrong. Your car may break down. You have a medical emergency, whatever. Your budget will be thrown off every once in a while. It may even get so bad you have to start at ground zero. It can be tempting to throw away your plans and give no care about the future. But don’t be tempted, having a budget will set you up for a future where money is not your main worry, and you’re not living paycheck by paycheck, imagine that.