Budgeting Tips for Young Adults
As young adults, they are still developing their financial habits and skills. That’s why it’s essential to build a solid foundation for budgeting now. What is budgeting? Budgeting is about prioritizing their needs and wants by allocating their money for necessities and then setting aside some funds for spending on what they would like. This article discusses budgeting tips for young adults.
What is budgeting?
Dr. Jordan Sudberg states that budgeting is all about prioritizing their needs and wants by allocating their money for necessities and setting aside some funds for spending on what they would like, also called financial planning. Budgeting allows them to make sure they have enough money to pay their bills and live on. It also means they can save money for the future or a specific purchase.
What young adults should consider before budgeting:
Think about their income and outgoings.
Take a look at the income they receive and their expenses. See if they can cover their needs using the money they have. If a significant part of their income is from fixed payments, such as a mortgage or rent, move that money into an account dedicated for that purpose. That way, they won’t have to worry about it every month.
How much is the money they will spend each month?
This is the first thing we should consider budgeting. As a rule of thumb, think that they should have at least ⅓ to ½ of their monthly income for needs and ⅓ to ½ of their monthly payment for savings or splurges. They can adjust this number based on how much other expenses are, how much they earn, what unexpected costs and opportunities might arise in the future and how many people will be depending on them.
Think about what they would like to do.
When they are spending money, think about how much of their income they want to spend on more fun or pleasurable things. What activities and experiences will bring them joy? What is something that money can’t buy? For example, maybe they want to invest in experiences – like travel or athletic hobbies – that bring a lifetime of memories and growth opportunities.
How much free time and money do they have?
Are there other things they have around their house that can be used for fun, like board games, arts and crafts, and hobbies? And are there other things around their house that can be purchased to make work easier, like a couch or a set of chairs?
Think about their financial institution.
Is there a credit card offered by their school’s financial aid office? Are there other loans or scholarships they need to apply for that offer certain rewards, such as back cash rebates or college-level discounts at local shops, restaurants, and movie theaters?
Think about their parent’s financial situation and ability to contribute to their needs.
After they have thought through their options and come up with a reasonable budget, it is time to think about how they can get more money. This might mean that they need to talk directly with their parents and ask them if they will pay some of the costs or make some sacrifices to afford something they want.
In conclusion, Dr. Jordan Sudberg states that budgeting is essential because it allows you to create a plan for your finances. This plan will help them ensure they have enough money to live on
and enjoy their life. And, with a bit of practice, budgeting can become more accessible and natural over time.