For working young adults, budgeting and managing your money is one of the most important yet difficult things to do. Whether you are a person in your late teens working to get you through university education or in your twenties or early thirties striving toward financial stability, you want to make sure that you have an effective budgeting plan.
A strong budget plan not only helps get you through the month until the next payday; it also aids in managing your spending.
If you are a young adult who is struggling to keep up with your finances, then a budget plan overhaul is right for you. Here are some tips you should know.
Determine Your Goals
Before you can decide on the financial management strategy, the first thing you need to do is to list down the things you want to achieve with this overhaul. Do you want to limit your spending? Perhaps you want to reach a certain amount in savings by a certain time. You might also want a worry-free month in which you have all your needs in order while having the leeway to spend on your wants.
When you determine your goals, consider long-term and short-term goals against your needs and wants. This way, you will know where you want your money to go.
Find the Best Method for You
You may be familiar with the traditional type of budgeting in which you list down all your expenditures and allocate amounts of cash to each item. This is perfect for individuals who have the spare time to sit down and study their monthly expenses.
However, if you are a busy individual who simply wants to allocate money for your non-necessities, needs, and savings, then the 50/30/20 methods are the right technique for you. You simply need to set aside 50% for your needs, 30% for your wants, and 20% for your savings.
Now, if this is still tedious for you, then the 80/20 method may just be the simplest form of budgeting. This gives you the liberty to spend 80% of your budget for anything you want and need while making sure that you have savings equivalent to 20% of your income. Of course, you can adjust the percentage depending on your preferences.
Lastly, keep in mind that discipline is the key to achieving your goals. After all, your budget will not do anything for your finances if you do not practice discipline.
So, when you allocate an amount for your wants, make sure that you stick to the amount for things that are not considered basic necessities. Likewise, it is important to control yourself from dipping into your savings pool.
It is important to understand that every individual has their own circumstances to deal with in terms of finances. However, these tips are designed to encourage you to take a good look at your finances and realize where you go wrong and what you do right. In the end, your budget plan will take the form of whatever allocation works best for you.