One of the scariest and most daunting parts of being an adult is having to manage money. It is one of the most vital aspects of living day to day life. When we first leave home and have to live on our own, it can be scary to know what to do with our money. Oftentimes we look at our bank accounts and wonder, how much can I spend on groceries? Should I buy a new outfit? Can I afford to go out with friends this weekend? Figuring out the answers to these questions can be difficult.
Unfortunately, as vital as managing money is, it’s not a skill that is taught in school. For those that attend a university, there are often many things that we learn, both through academic and personal experiences. We learn skills such as how to live with roommates, cleaning up after ourselves, and time management. We also take difficult classes and learn topics such as calculus, philosophy, and computer science. However, throughout all these classes and learning experiences, we are hardly taught how to budget or personal money management. Without ever being taught how to manage money, it often feels impossible.
While budgeting or managing money can feel scary and hard, there are ways to teach ourselves how to become better at money management. While I am by no means an expert, I do have some tips and strategies that I use to keep track of my money and budget. Here’s a list of some of these suggestions.
- Keep Track of Expenses and Purchases
One of the best ways to understand where your money is going and how much you’re spending is to keep track of your purchases. Write down where the purchase was made, how much it cost, and what category it falls into (Groceries, Gas, Entertainment, Non-Essential Spending, etc.) Personally, I use a spreadsheet to track all of my purchases. I spend about 10 minutes every week looking over all of my recent purchases and tracking how much I’ve spent. This helps to understand where your money is going and how much money you’re spending on different categories.
- Budget Your Spending
Once you’ve kept track of your spending and you know how much money you typically spend on each category each month, you can start to budget and plan your spending. For each month, you can set a goal for how much you’d like to spend on each category. For this to be successful, it’s important to set realistic goals for your spending. For example, having your goal be to spend $30 on groceries each month might not be realistic. By tracking your spending, you’ll gain a better understanding for how much you spend each month and can set a more realistic goal. If you’re not sure where to start setting your budget goals, following the 50/30/20 rule is a good place to start. The 50/30/20 rule suggests that 50% of your monthly income should go towards needs (rent, utilities, groceries, car payment, etc.), 30% towards wants (shopping, entertainment, etc.), and the last 20% towards savings or debt. By setting budget goals, you’re able to help yourself on track and not over spend.
To set-up a budget there are several great sources online.
Bank of America has great resources on how to create a budget which can be found here.
If you’re interested in using a Spreadsheet or another template to start budgeting, the website Easy Budget has several free resources and templates to use to start budgeting, their link can be found here.
If you like using your phone, Rocket Money and EveryDollar are two free apps that allow you to track purchases and budget your money from your phone.
- Do your Own Research on How to Become Financially Literate
Financial Literacy is the ability to understand and manage your finances effectively. Money management and finances are very personal and vary greatly from one person to another. There are no one set of rules or guidelines that fit everyone and their needs. To effectively manage your financial resources, you need to understand how to earn, save, spend, borrow, and protect your money. While some of these skills come with time, becoming financially literate can help to prepare you for financial emergencies, managing debt, and saving for the future. While unfortunately, our schools and universities typically don’t offer classes on how to become financially literate, there is a plethora of online resources that can help.
Here are a few sites and articles that may help:
MyMoney.gov is a financial education website that is run by the U.S. Department of Treasury.
Investopedia is a finance website that includes information about personal financial management, finance news, education resources, and more. Here are a few articles that could be helpful for beginning to become financially literate:
Financial Literacy: What Is It, and Why it is So Important by, Jason Fernando
The Ultimate Guide to Financial Literacy by, Caleb Silver
Finance Terms for Beginngers by, Erik Haagensen
NerdWallet is a great resource for making financial decisions. They offer reviews and insights on different financial aspects like banks, credit cards, insurance, and many others. They also offer a variety of tools and guides to help make decisions and start budgeting.
Managing money can be difficult, but the best thing to do is to simply start. It’s okay to overspend on a budget or forget to track a few expenses. Hopefully, these tips and resources will help to make starting to manage your money a little bit easier. For me, I found that becoming more financially literate and better at managing my money took a lot of time. To create an effective and realistic budget took several months of tracking my expenses and learning to adjust my spending to follow my goals. Many of these tips that I suggested above helped me to feel more comfortable with managing my own money and become financially literate.