Why You Need a Budget
It is never too early to start a budget even if your money just comes from allowance, holidays or birthdays. When you have money what do you think about? Are wanting to buy something that you've been wanting? Are you going to use it to go shopping, see a movie or spend it on coffee, Panera or Chick Fil A?
Whatever you choose, that is your right because that is your money. The questions that you need to ask yourself are; how much do I have and how do I know what is left when I start spending it?
If you have a job as high schooler, college student or young adult the spending will increase. When people have more money, they spend more money.
Without a doubt, if you do not track your purchases you will spend more than you think. Eventually you will run out of money, meaning you will overdraft on your account which can easily be a $30 cost. This is what happens to most adults except when they come up short with their finances, it is charged to credit cards and then they owe interest on top of that money. This is a bad habit and this is precisely why you need a budget.
How to Create a Budget
The first thing is that you need to determine is how much money you have coming in from working or if you have savings from other sources. Having a job makes things easier because regular money comes in each month.
The first step to executing a budget is to account for the total income and total expenses as they may not be consistent from month-to-month. This exercise can be created on scratch paper or through spreadsheet software or an online budget tool.
Once the monthly income is determined, the next move is to look at previous bank and credit card statements to understand previous spending history; some costs are fixed (stay the same each month) and some are variable (that can change each month). If this is the case then you create an average.
Here is a sample list:
-Cell Phone or Data Plan
Tracking the Expenses
There are several tools out there including Greenlight, Tip Yourself, Mint, YNAB and PocketGuard. You can also go about it the old fashioned, yet very effective methood of using Excel or Google Sheets The whole point is that you are budgeting.
In the table above, the budget is balanced (projected to come out at zero). There is also a category for spending money (that does not have a category) and savings. The rule thumb with savings and investing is that you should put at least 10% of your money away. In this example, 15% is being saved.
If you can achieve this goal from the very start there is a good chance that you will remained disciplined with your finances. Try to start with saving $500. Even with that amount of money, it is a great a feeling to know that you have some socked-away. From that point forward the odds are that you'll keep building on it. This is known as a nest egg.