Budgeting is a really important part of navigating life- especially as a young adult. In this guide we will be delving into how to go about developing a way to formulate a budget given your income, expenses and future wants and needs. It is important to try to be as strategic as possible with your funds so as to avoid the pitfalls of debt and bad credit as much as possible.

1.Determine your Preferred Budgeting Tool
This may include, but is not limited to:
-Pen and Paper
-An App
-Excel Spreadsheet
I personally would recommend using an excel spreadsheet or app if you feel that your technology is reliable to do so as it will reduce the time needed for calculations by a lot. It is also easier to make changes on a Digital version as well. If not, some people do prefer handwriting their expenses and income for their budgets because it forces them to come to terms with the amounts that they are dealing with because they are logging the receipts manually. Regardless of which method you prefer, make sure to stick to it so that you can stay organized and have your information all in one place.

2.Keep Track of Different Categories You Spend On
For example categories could include:
Clothes and/or Online Purchases
Experiences or Travel
Rent or Living Costs
Savings Plan
Other Expenses
This will help you get a better idea of what categories you are spending the most money on. For example, some things like utilities and living costs are fairly constant each month so if you see a sharp increase in price than I would encourage you to call and ask what changes resulted in those fees. It is unfortunate, but sometimes upon calling utilities they say that there was some sort of mistake and reduce the fees back to normal – which never would have occurred if you had not called and asked. You’ll also want to keep track of where you are spending money in these categories. For example, paying for gas for your car which you use to commute is a better use of money than taking an Uber and paying for that although the Uber may seem “cheaper” in the short-term. Similarly, you want to differentiate between money spent on fast-food, vending machines and restaurants AND money spent on groceries. Again. this is a distinction between long-term costs and short-term costs. $200 groceries will make way more meals than $200 in fast food.

3.Make Substitutions or Changes Where Necessary
Once you get an idea of what you are spending in each category, ask yourself if it was all necessary to buy or if it was not. Make sure to check on different ways you could be saving money on essential categories. For utility bills, the companies can often suggest ways to reduce usage or come by and let you know what appliance or feature is costing you the most. For rent, make sure to recognize your Renters rights and to stand your ground if you feel that the pricing or restrictions become unfair to you. For food, look into deals and learning how to meal prep. Meal preps will greatly reduce the amount of time you spend cooking which can help you to focus your time on your work or schoolwork. They also help a lot with portion control. There are many recommendations on meal preps based on your preferred ingredients and preferences and I would recommend searching for those.

4.Avoid Spending a Lot of Money Where you Work
This is especially true for those of us that have jobs in stores like makeup brands, clothing brands and food. Although employees do receive discounts, make sure to only be buying things that you would have purchased regardless and to not be tempted to add more and more stuff. At the end of the day your incentivized by the companies to spend your paycheck back at the company you work for, but it is important to resist the urge to do so. At the end of the day, the work that you’re doing at the store is for the monetary compensation to pay for necessities in your life with some wants and not the other way around.

5.Avoid Debt and Over-Drafting if Possible
If you need a payment plan for a birthday present- do not buy that present. If you are going to be unable to pay your credit card bill because it’s too high- do not get to that point. It is easy to put-off the responsibility of paying for something immediately because of credit cards. Unless, it is absolutely unavoidable aim to spend less than what you earn. Many people regret their spending habits when they were younger, because they will continuously affect you. A poor credit score makes it harder to secure loans for things like houses, and cars. It will also make you often have to pay more up front in order to get the same product just because of your credit history. Of course, sometimes circumstances are unavoidable in which case you’ll have to work hard at getting your credit score back up. This can be accomplished by making on-time payments and consulting with people from your bank on more specific advice.

6. Set Aside Money Each Month
This is not always a realistic goal especially in the start of one’s career or college experience. However, if you have the means or will to do so then it is definitely a possibility. This is a good way to do something that you really want without going into debt for it. For example, let’s say you want to go somewhere fancy for your birthday. Make sure to accurately estimate how much you will spend for it. Then determine how far out/ when you’ll need to have the money by. This should provide you with a dollar amount, per month, you’ll need to save in order to reach that goal. If you don’t have an immediate goal in mind, it is important to save in case of an emergency. For example, savings are very useful in the case of a sudden loss of work, an accident or a death in the family.

I’m not personally well versed in all the forms of investments, but if you want to make good use of your savings it may be a consideration. Investments can often increase the amount of money you will gain as opposed to the small amount of interest accrued, but they do come with risk. It is important to speak to a professional in regard to investments, before attempting to put your money toward it.

8.Stick To Your Budget
It may be tempting to justify spending more than what your budget is on a special event or to “treat yourself.” But, this is a bad habit because it does not promote discipline and adherence to your budget. You’ll be more willing to justify more and more financial costs which will throw your budget off. Stick to what you set and adjust your goals as needed.