8 Tips on Budgeting for Young Adults

What is Budgeting?

Budgeting includes planning for every cent you have. It’s not rocket science just a simple strategy you can follow to secure your future and get your financial life under control with peace of mind.

Having good habits especially when it comes to young adults is rare. However taking baby steps, you will find yourself taking control over your life and life will seem much better.

Basic Rules for Budgeting

You can start with calculating your total income and simply apply the 50-30-20 budgeting rule. That is very simple and requires that you spend 50% of your monthly income on your life necessities, 30% on your luxuries like dining out, shopping, and hobbies and 20% of your monthly payment will go to your saving account or for paying your debts. You will finally observe your life is getting better and you will start feeling more confident.

8 Tips on Budgeting for young adults

Avoid Temptations

One of the greater challenges a young adult faces is avoiding the temptation to spend money. They lack responsibility when it comes to spending money. For example, going to the mall and shopping for your favorite pair of shoes on your credit card is easy. But what about the credit card bill you’ll have to pay later along with interest? It would be very smart of you if you pay in cash for the 30% money, you put aside for your luxury items.

Another mistake that young adults make is not paying the full credit card bill. That will not only put you in debt, added interests, and jeopardizes your credit score. It is very important that you spend very wisely when paying with your credit card and never pay more than you can pay at the end of the month. This self-control habit will not only allow you to manage your money more efficiently but also make you more responsible.

Take Charge of Your Financial Future

The only person responsible for your financial future is you. When you are building your career and finally getting regular paychecks you will get so many opinions. Your dad is gonna advise you to invest in some real estate properties, your uncle is gonna advise you to invest in stocks. But you know about your finances more than anyone and it is you who should make this decision. There are tons of books and guides available where you can study about managing your finances and investing and easily make an informed decision.

We are not suggesting that you completely disregard your elder’s advice but it is you who should restructure your finances and decide what you want to do with your money.

Track your expenses

One of the most important tips is tracking all your expenses and analyzing them at the end of each month. You need to see how much impact a Starbucks coffee has on your expenses. So, when you start monitoring your spending you will start understanding the art of budgeting and start taking control over your financial life. Here is a pretty good Budget Planner that will help you keep track.

Pay Attention to Saving for Rainy Days

Have you ever thought about the days when you lose your job or face some kind of financial emergency? You can lose your job or get some medical emergency. The general rule is to save for your 4 – 6 months’ salary. This kind of saving will make you feel very comfortable and give you peace of mind. You will know that you are prepared for your future and have your finances under control.

Once you establish this saving habit, you will soon have enough money to opt for a retirement plan and make a down payment for your new house. Find out more about rainy day savings

Seeking a High Salaried Job

When you are looking for budgeting tips for young adults, you can either increase your income or control your expenses. So many people opt for controlling their expenses, however, there is another thing you can do. You can negotiate with your employer to increase your salary and keep looking for higher-paying jobs. There is always a catch. They will either say no or you will get a pay raise or maybe you will get that high-paying job. That way you can improve your life quality without sacrificing anything that you love.

Perhaps starting a small business is up your alley.

Protect Your Money

Protecting the money you have worked very hard for is very important. You dont want to wake up to an empty bank account. The inflation rate can eat all your saving if you are careless in this regard. Do your research and open a savings account with a bank offering the highest interest rates.

You can also opt for insurance and protect your money. Buy renters insurance if you live in a rented space or apartment. That way you can protect your belonging in case anything bad happens.

Start Saving for retirement

The key to retirement saving is starting as earlier as possible. The sooner you start, the less money you’ll have to invest each month to reach your retirement goal. So, if you start now, you’ll probably have to save 100$ a month. But if you start after 5 to 6 years, you’ll have to save maybe 500$ per month. There are so many retirement plans available and you can get started with them and prepare for your financial future while enjoying your life.

Get Medical Insurance

Although, at this age, the paycheck is not very big and most of the money goes into meeting basic requirements. But it will be very smart of you if you get medical insurance. Can you imagine, what will you do, if you get a small accident and have to pay for emergency treatment? Medical insurance can reduce the financial setbacks risk and help you get necessary medical treatments without hurting your pocket.

Final Words on Budgeting for Young Adults

It is the perfect time to start with these 8 tips on budgeting for young adults and take control of your financial life and change your life for the better. Click here for some more on Budgeting and Savings.