Budgeting Tips for Young Adults
It’s never too early to begin planning for your financial future. As a young adult, the spending habits you practice now can have a big impact on your financial security down the road. Here’s some tips, tricks, and best practices for how to get started!
The Importance of Budgeting
Understanding Financial Responsibility
Managing your finances is an important aspect of being a responsible adult. When you decide to begin budgeting as a young adult, you have a responsibility to create a plan and adhere to it, so you can enjoy the benefits of your hard work in the future.
The Benefits of Budgeting
While it can sometimes be difficult to set aside part of your income, the benefits of budgeting make it worthwhile. Having some money set aside will lessen the impact of unexpected emergencies, make it easier to finance expensive purchases, and strengthen your credit history.
Setting Financial Goals
Short-term vs Long-term Goals
It can be overwhelming to start setting financial goals from scratch. Start by outlining short-term goals for something you’d like to be able to buy within the year – like a new pair of shoes or even a weekend trip. Then, create a list of more long-term goals. These will be big, important purchases you hope to make in a few years, such as a new car or your first home.
SMART Goals Framework
A helpful tool for building your first budget is the SMART Goals Framework. SMART stands for Specific, Measurable, Achievable, Relevant, and Time-Bound goals. Try and keep each of these aspects in mind while crafting your budget goals. Setting SMART goals will help create realistic targets to achieve with your budgeting plan.
Creating a Budget
Assessing Income Sources
The next step in planning your budget is to evaluate your income sources. Do you work part-time or full-time? Are you a salaried or hourly employee? Take note of how much you might make in one month.
Identifying Expenses
Once you’ve established your sources of income, identify all of your necessary expenses. This can include rent/utilities, groceries, gas, etc.
Choosing a Budgeting Method
How are you going to set aside the money you’re saving with your budget? If you haven’t already, now would be a good time to open a personal savings account. Peach State Bank has two incredible options (with monthly service fees waived for those under 21): click here to learn more!
Tracking Your Spending
Utilizing Budgeting Apps
It can be intimidating to try and keep track of a budget on your own. Utilizing an outside source like a budgeting app can help relieve some of that stress. Some of the top-performing budgeting apps as recommended by Forbes are Quicken, YNAB, and PocketGuard.
Maintaining a Spending Journal
An alternative to budgeting apps is keeping a notebook as a spending journal. Be sure to write down how much you’re putting aside each month as well as your expenditures and income.
Adjusting Your Budget
Reviewing and Analyzing Monthly Expenses
It can take some time to fully analyze your budget. Use the first few months to understand where you’re spending your income – you might be surprised by how small purchases can add up over time!
Making Necessary Adjustments
Once you understand your expenditures, you can start to adjust your monthly spending. Be sure to prioritize necessary expenses and focus on what you can live without; it could be time to start making your own coffee at home instead of buying one every day!
Saving Strategies
Establishing an Emergency Fund
It’s very important to have money set aside in case of an emergency. This can cover surprise costs such as car repairs, unexpected medical bills, and more. Having an emergency fund means you won’t have to go into debt to cover the cost of an unplanned expense.
Setting Up Automatic Transfers
A great way to observe your budget is by setting up automatic transfers in your savings account. This means that a designated amount of your savings will automatically go towards bill payment or into a separate account.
Overcoming Budgeting Challenges
Dealing with Unexpected Expenses
Unexpected expenses happen to everyone, but they can still feel like a setback in your savings journey. Having an emergency fund will help to offset these events so that one trip to the emergency room doesn’t wipe out your savings.
Staying Motivated
Maintaining a budget can take a lot of work and discipline, so it’s important to stay motivated and consistent. Think of being able to purchase some of your short-term goals as a reward for your efforts!
Budgeting with Peach State Bank
Starting to budget early is one of the best possible ways to set yourself up for financial success as a working adult. The sooner you get started, the better. Contact us today to see how Peach State Bank can help you maximize your savings!