LB Note: This is Torie's first byline. It's definitely been a minute for me since my early 20's – but I've loved reading her thoughts on budgeting just out of school. Take it away Torie!
Your early 20’s are rough. If you’re anything like me, being a 20-something mostly consists of stressing about school, stressing about money, and then ultimately stressing about how stressed out you are. It’s a confusing time, but budgeting in your 20s doesn't have to be difficult.
I think what makes your early-adult finances particularly tough is that most of us don’t get a financial education unless you go looking for it. So you could technically go weeks, months, or years (yikes!) without setting a budget, simply because you didn’t think you needed it.
But let me tell you this: you need a budget.
I’ll help get you started with a few of the things that I’ve learned.
It's Important to Track Your Spending
This is always going to be your first step in creating a budget, no matter what age you are. After all, you don’t want to budget $30 for groceries when you’ve been spending $130 each month. Tracking your spending helps you to see where your money is typically going, so you can then turn around and decide where it should be going in your budget.
Thankfully for you, there are dozens of ways to track your spending that do not require you to actually do much of anything. Look into apps like LearnVest that let you sync up your bank accounts and let them do the heavy lifting.
Budgeting in Your 20s – List Out Your Expenses
This should be super easy.
- Do you pay rent every month?
- Have a Netflix subscription?
- Credit Card payment?
Your next step should be making a note of every monthly expense you have, along with their due dates and how you pay them. Honestly, you should be setting up your bills to autopay so you never miss payments, but that’s a whole different post.
Once you’ve made a note of what you have to pay and when you have to pay it, it’s finally time to….
Build Your Budget
First off, find out what budgeting strategy best suits you. If you’re the kind of person who likes knowing where every single dollar is going, the zero-based budget is going to work better for you than the 50-30-20. It’s important that you are using a strategy that you like because ultimately you’re the one who will be responsible for implementing it.
Then, once you’ve figured out your budgeting strategy, it’s time to actually build the budget. A great way to get started is to think of it like a math formula:
Income – Fixed Expenses (rent) – Debt Repayment/Savings – Variable Expenses = Leftover “Play” Money
Then take what you learned about your spending habits from your tracking. Are you constantly spending hundreds on food each month, but not buying clothes on the reg? That’s a sign that you should give yourself more money for food than clothing. The trick is to allow yourself to have fun, just as long as you’re sticking to your goals.
For some more amazing, in-depth info on building your first budget, check out this post.
I’ve Built My Budget, Now What?
Now it’s time to actually stick to your budget. I think it’s really important to include some tips for following your budget because it can be really tough at first.
I remember when I made my first budget I felt like a genius, like a personal finance guru….until I started going over my limits.
….Because even though I had a new budget, I didn’t really change the way I was spending. Don’t be like me, guys.
First, Set Attainable Goals
Just because you have a budget doesn’t mean that you’re in the financial clear. If you aren’t sticking to your budget, it might be a sign that either your target spending amounts aren’t correct or that you aren’t paying attention to your spending. Both can lead to a total budget implosion, so make sure that you set goals that you can achieve so that you don’t get discouraged.
Still Struggling? Try a “Daily” Budget
I’m a student. When I’m on campus, I typically buy lunch. So on days that I go to campus I can always expect to be paying for food. The same goes for hanging out with friends: if we play bar trivia on Tuesdays I should be preparing to pay for dinner and a drink.
If you know that there are days where you are going to want (or need) to spend money, try balancing them out with “no spend” days so that you aren’t always out blowing your budget.
There's also a great app called “Daily Budget” that can help you get really granular with your spending.
Finally, Just Be Aware of What You're Doing
Honestly, what I feel to be the most effective way to stick to your budget is just being aware that you have one. If you’re thinking “Well, I’ve already spent a lot on drinks this month” you’re at the very least acknowledging your spending. Is guilt an effective motivator? Totally. It may not be fun, but it will help you reach your goals!