Handling one’s finances well while young is the best way to stay financially stable. This can go well into retirement. Manage your money, and you can have a comfortable safety net if unexpected expenses happen.
But with all these opinions on spending and keeping money wisely, it can be intimidating for young people to take the step into financial literacy and budgeting. Here are four ways to determine the kind of budget plan that works best for young earners.
What does budgeting mean, and why does it matter?
Simply put, budgeting means setting aside certain amounts of money for different things. Doing so ensures that you don’t run out of it. It’s a plan that takes into account how much you earn versus how much you spend in a given time frame. With this, you can keep track of expenses or any debts you might incur.
The first step to being financially sound moving forward is to understand the importance of having (and sticking to) a budget plan. For young folks, having a good one can be a head start towards financial independence.
1. Know how much you earn
In the age of the Internet, there are many ways for young people to earn a decent amount of money. Whether you have a part-time freelance job or a full-time wage, knowing how much you earn can help you figure out the right budgeting method. It should align with your work and comfort levels without compromising your necessities.
Get familiar with how much you spend on necessities daily by using budget tracking apps. As much as possible, hold on to receipts and payslips so that you don’t forget.
2. Determine your priorities
What is your top priority right now? Whether paying for a student loan or debts, rent, utilities, or even medicines, knowing where your money should go is key to figuring out your budgeting.
If you’re paying off debts, going with a “pay yourself first” method can work the best due to its nature of setting aside a bit of money per payout and leaving you with an ample amount to spend on other things. Alternatively, if you’d much rather prefer to have better judgment over your needs and wants, the 50-30-20 budgeting method is good.
3. Define any short-term and long-term goals
Short-term goals are monetary goals that can take up to a few months to meet. Saving up for a new phone or a better computer for work can count as a short-term goal. You can obtain it in a short amount of time.
On the other hand, long-term goals are those that can take years to save up for. For instance, you might be planning a wedding. How you define short-term and long-term goals depends on how much you earn and how much you can set aside. Taking that wedding plan as an example, that lovely reception venue might have to wait until you give yourself enough time and effort to earn.
4. Consult a professional
When you hit a wall and your current financial situation becomes complicated, ask for a professional opinion. Financial advisors can help you understand concepts. They can also assist you in creating a budget plan that is perfect for the situation you’re in. Asking for an educated and unbiased opinion can help you pay attention to things that can crop up and become an issue. Experts are always there to help, so feel free to bring up any concerns.
Money shouldn’t be the sole focus of anyone’s life, but it helps make a living a lot easier. Knowing what to do with it (and what not to do) at an earlier age can save you a lot of hassle. Figuring things out in the future won’t be so difficult.
It takes more than just a piggy bank and a notebook to keep track of a solid budget plan. Be prepared to sit down and do some heavy thinking. Write down any relevant questions, like “How much do I earn in a month?” and “Do I have specific goals I want to meet?” This might sound simplistic, but it’s a good step in the right direction.
Being young doesn’t mean you can’t start being financially wise early. In fact, it’s the best time to start being aware of your savings and expenses. Having the right budget plan will help you see a clearer version of the future you want, and you won’t have to sacrifice too many things that you enjoy. A good budgeting method is a smart start to a secure future.