When it comes to money, many young adults feel like they don’t have a lot of experience or knowledge to rely on. This post will be useful for anyone, regardless of age, who wants to create and stick to a budget. For younger people, these simple budgeting tips are an important first step for all young adults to understand.
Step 1: Understand your spending and expenses
The first step in creating a budget is to sit down and take inventory of all of your current monthly expenses. Many people underestimate how much they are spending on things like eating out and shopping each month, but it’s important to take into account all of these smaller expenses when creating your budget. The goal is to make a list of all of your current expenses and to take note of anything that you are spending more than you had planned.
Step 2: Define your monthly income
How much do you earn every month? This includes any income that you receive from a part-time job, side hustles, or other sources of income. Be sure to distinguish between your gross pay and take-home pay. This can help you figure out how much money you have to spend. If possible try and stick to monthly calculations in the beginning. The goal will be to eventually budget with each paycheck, but you will get there over time.
Step 3: Evaluate your current spending patterns
Once you have an idea of what you spend on each month, evaluate your current spending patterns. Are you spending more money than you are making? Is money being left idle without a purpose? Are there areas where you could save more money?
Check what you are spending your money on and decide if there is an opportunity to make better use of your money.
Related Reading: YNAB Is My Favorite Budgeting Software for Young Adults
Step 4: Create a budget based on your income and priorities
Include all of your sources of income in your budget – salary, side jobs, investments, etc. Keep in mind that you may have to sacrifice in some areas in order to support others.
For example, if you need to decrease spending in one area to free up money for an emergency fund or to put towards your retirement account, understand that choice.
Related Reading: How To Create An Emergency Fund For Young Adults
Step 5: Compare your tracking with your prioritized budget.
Look at your spending patterns over the last two months. Are they sustainable? How does your spending align with your prioritized budget? These are the discrepancies that you need to be aware of and take steps to address.
Perhaps you have been eating out too often, which means you need to cut that expense from your budget; or maybe you’ve been buying a lot of frivolous items that don’t contribute to your financial goals. Whatever the case may be, be sure to make a note of any discrepancies.
Write down what you think needs to change and come up with a plan for how you will make those changes a reality. Once you know what changes you need to make, commit to following the plan and keeping to it.
Again, compare your spending patterns from the last two months to your long-term budget goals. How does your current spending compare to your needs and wants? Are you buying things that contribute to your long-term goals or are you spending money on things that will not help you reach them?
Make a list of what needs to change so that it can become a reality. If your spending doesn’t align with your goals, you must make changes to reach those goals; otherwise they will never happen.
Step 6: Implement
You should now have a good understanding of where you are currently (two months of spending data) and where you want to be (prioritized budget). Develop a budget that is sustainable and fits your accepted lifestyle. Commit to following that budget and track your progress as you go.
Step 7: Refine and Refine
Continue to make adjustments as necessary and continue to follow the budget over the long term. Remember, your budget is a spending plan.
So when necessary, revisit your budget and adjust your priorities to reflect changes in your financial situation or your spending habits.
Ready to get started budgeting now?
Get started with this free excel budget!
I hope these budgeting tips prove helpful for you new adults!
Do you have any budgeting tips that you think would be helpful for young adults? Share them below!
Best of luck adulting!
And Remember,
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