At a glance, budgeting seems easy: spend less than you make. But as a college student, I’ve come to learn it’s not as simple as it may appear. Here are some of the best practices young adults should know before heading out on their own.
In its simplest form, a budget is an estimate of your income compared to an estimate of your expenses. However, it’s smart to be specific when setting up your personal budget, especially if you’re budgeting for the first time.
Specificity allows you to better understand when, where and how you’re spending your money, which allows you to adjust your budget more easily and make smarter purchasing decisions in the future.
Try segmenting your budget into basic categories like:
- Car payment
- Insurance payments
- School expenses (books, technology, etc.)
- Electricity and water
- Phone payment
- Gym membership
- Subscriptions (streaming movies or music)
- Dining out
Keeping detailed lists might help you budget more effectively, and can help you remember to include costs you might forget. You can get a jump-start on this process by using our downloadable budget sheet.
When you make a purchase, no matter how small, you should write it down so that you can track those purchases against your budget. No need to carry around a pen and paper, though. Most smartphones have a “notes” app, which can help you manage your purchases on the go. You can also download your bank’s mobile app and set up notifications to monitor your spending habits.
If you’ve just opened a bank account, or are entering your first job, you may have never written a check before. Although the rise of plastic payment methods has reduced dependence on check writing, it’s still good to know the basics. Thankfully, checks are relatively standardized, so here’s a quick overview on how to write one:
- Enter the date
- Write the name of the person or organization receiving the payment
- Fill in the numeric dollar amount
- Spell out the amount using words
- Sign your name
Keep in mind, it’s important to use the check register to note the check number, payee and amount. Feel free to use the MEMO line if you want to include a brief reminder.
There are several relatively easy methods for making the most of your money when you go to the grocery store on your own.
Make a list. Take inventory of what foods you already have, and if you cook, write down the ingredients you still need to buy.
Eat before you go to the store. Seriously, it might sound silly, but stepping foot in a grocery store on an empty stomach makes it that much easier to overspend.
Map your route. Knowing where the items you need are in the store can prevent you from wasting time. Speed past those aisle wanderers and make every grocery trip a quick one.
Don’t be afraid to bargain hunt. There is no shame in using coupons, and you should always keep an eye out for sales and special promotions. While your friends are overspending, you can be enjoying half-off snacks all month.
Before you encounter a financial emergency, it’s critical to set aside some money. Open a savings account, then make sure you’re depositing money into that account when possible. Even if it’s a small amount, make sure you pay yourself first but always save something. How much you set aside for emergency purposes will depend on your income and expenses.
If you’re caught in an emergency situation and you don’t have enough money saved to sufficiently cover the costs of that emergency, you may have to take out a loan to cover those expenses. If you do encounter a financial emergency, don’t forget to start replenishing your emergency fund as soon as you can.
Once you’ve created an emergency fund, you can start saving for your future, too. Navigating a new beginning in your life will present its challenges, but getting your finances in order is a great step toward financial independence and stability.
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