High School taught me many things. However, it did not teach me the basic skill of budgeting. I feel like budgeting is an essential skill many people must take the time to learn. It’s what ’s going to get you through your entire adult life. As a student living independently, I believe that learning how to budget was the most important skill I was taught, especially when I started to earn my own money. Here’s a quick little guide to start you off on how to budget and set your life up for success.
1. Know your income.
If you have a job, estimate how much you would make in a month. This can be a really rough estimate. Based on your income, you can set aside a certain amount of money you wish to spend and save. This will be different for everyone, as people with higher income may have more to spend and vice versa!
2. Calculate your total fixed outgoings
This is the amount you are going to be spending every month or year and it’s generally a fixed amount. It includes things like rent, utilities or tuition. Setting aside money for this is essential since those bills are important and have to get paid no matter how much money you have coming in for the month.
3. Calculate your variable outgoings
I like to think of variable outgoings as money spent “for fun”. Like any person, I love going out with friends, shopping or eating out. This expenditure changes every month and there is no fixed cost, but I do like to be realistic and set a small portion of money aside. Whatever, money is saved in this category at the end of the month can either go into my savings or be carried forward onto the next month. If I know I ’m going to be spending more the next month I try to keep my variable outgoings for the current month lower, so the money is carried over.
4. Save something
At the end of each month, I also like to put aside some money to save. This money is not to be touched and is used only in emergency situations. To encourage myself to save money, I like to envision something I want to be able to buy at the end of the year. For example, it can be a car or paying for a masters after undergrad. This motivates me to set aside some money to save as I know I’m using it for something in the future that I need to be able to afford.
I hope these tips help you to start looking into budgeting, as it’s a very important skill to build. There are also many apps and spreadsheets that can help you with this. My personal favourite is Mint. This app is connected to your bank account and keeps track of your income and spending. In addition, it provides weekly and monthly summaries, making it easier to set goals and regulate your spending!