20-somethings can save money too!

Budgeting

I don’t know how it is for you but in this day in age I needs ALL my money. Especially with whom our president is and all these changes he’s making....

When I graduated from undergrad my mother told me the first thing I need to do is create a budget for every month and stick to it. I wouldn’t say I have expensive taste but when I want something I will make it happen. With me entering the adult world I have to pick and chose what I can spend my money on and know the difference between wants and needs. At first it will be hard to differentiate between them (especially for me because I will convince myself that I need it). But ask yourself this: What do you want your finances to look like in one year?

As you grow older, you’ll understand a harsh but unavoidable reality: you are really only as independent as your wallet allows you to be. A poor understanding of personal finance can create roadblocks to one’s progress, no matter what the end goal is. It is especially important that 20-somethings can build a foundation for financial independence, as knowledge is power. We have many challenges in the workplace as it is. Financial literacy is imperative for our success.

Below I listed 4 ways I used when creating my budget:

Understanding the goal Create a goal for your budget that will help you control your spending so that you are able to spend less than what you make and focus our spending on what matter most to us. However you choose to budget, it should meet this goal. If it doesn’t you are doing it all wrong.

Track spending for a week

Monitoring every dime you spend for a short period of time will be eye-opening. It will show you how spending small amounts of money adds up over time. It will also give you the opportunity to see other areas of spending that otherwise get overlooked.

Charge It

Using your debit/credit card is a great way to monitor your money. If you need to know how much you spent on something during the month (ex: gas, weave, makeup, etc), you’ll be able to refer to your bank statement. You’ll be able to use your bank statement as a guide to create a budget for that category.

Save first It is important to remember that the ultimate goal of budgeting is to spend less than we make. The best way to do this is to save first. Rather than saving what is left over at the end of the month, save first and spend the rest. By getting money out of your checking account and into savings first, we are less likely to spend our savings during the month.

Emergency Fund

The reason to have an emergency fund is simple: You don’t know what’s going to happen in life. Statistics state that 78% of us will have a major negative financial event in any given 10-year period. You need to have cash ready to help you survive if you lose your job or your car needs a new car battery.

Once you know what your emergency fund should cover, the next step is to set up a savings plan to build toward your goal. An easy way to get started is to put any big payments, such as a tax refund or holiday bonus, away as savings. From there, work on a specific monthly savings goal and devote a percentage of every paycheck to savings. It’s a good idea to pay yourself first by establishing automatic transfers into a designated savings account.

Once you’ve committed to monthly savings, consider the options for where to put your emergency fund. For me my emergency fund is located in my savings accounts. A basic savings account is a good choice if you’re just starting to save and want to be prepared for unexpected expenses.