As you get closer to “adulthood,” there’s a lot to learn! Before you know it, you’ll be out on your own without anyone to make your decisions for you. It’s an exciting time, but one you have to prepare for.
Check out our five steps below to learn how to build a budget so you can start on the fast track to success.
What do you want to achieve in the short and long term? And what will it take to get there?
Maybe you’re planning to go to college or hoping to get a job right after high school graduation. Either way, think about the costs you’re going to incur. If you’re college bound, you’ll have tuition, books, and room and board, just to name a few. If you’re headed to work, you’ll need supplies, work clothes, and a reliable form of transportation.
What expenses will you have and how will you pay for them? What’s a realistic income during this time?
Even if you’re living on campus, you’ll still need money for school supplies and laundry. Maybe you’ll work on campus or have help from mom and dad. If you’re headed to work, you may have more bills sooner, like rent, utilities and a car payment. Maybe you’ll find a full-time job or need to work two part-time jobs to earn what you need.
Identify your income and make a list of your expenses. Subtract the total amount of your expenses from your income. If you get a negative number, you’ll need to make some changes. If you have money left over, there may still be room for improvement.
Take a good look at your bank accounts. Where does your money go?
Maybe now you’re able to spend money on movies with friends and dinner out after soccer practice, but once you have more of your own bills to pay, your habits will need to change.
Figure out where you’re wasting money and come up with ways to reduce your spending. Rent a movie instead or make dinner together at a friend’s house.
Are you putting money into a savings account each month? How would you pay for an emergency if you were away from home?
Whether you’re planning to work on campus part-time or get a full-time job, it’s important to set money aside each month for unplanned expenses or emergencies. Driving to work and get a flat tire? It’ll be up to you to pay for it to get fixed.
Is your budget working for you? Has anything changed?
Your budget isn’t something you can set and forget. You may have estimated that you would spend $10 a month on coffee, but are actually spending $30. If you don’t adjust your plan, you’ll run out of money sooner than you thought.
Even if you estimated your spending well, you want to think about how your goals may have changed. Just like you’re not the same person you were a year or two ago, you won’t be the same person you are now a year or two in the future. You may decide you want to go to college, or change your major and end up spending an extra year in school. Either way, your budget will need to be adjusted.
Set a reminder on your phone every month to review your accounts and see how you’re doing with your budget. This way, you can make changes before a major problem occurs.