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If you’re in your 20s and looking into mastering your money, building up savings, or just getting better at budgeting, you’re in the right place!
Learning to budget and save are important life skills that will make things so much easier and less stressful for you!
Mastering your money is important because you don’t want to be flying by the seat of your pants every single month or closing your eyes every time you swipe your card out of fear it will get declined. Again.
So if you’re ready to start mastering your money, these are the things that I’ve done over the last year to get my finances together, and they’re going to help you do the same!
1. Understand where your money is going
The first big thing is to understand where your money is going. It’s really hard to keep track of something if you don’t even know exactly where it’s going.
You can start by breaking up your different expenses into categories. The first one I always start with is what I call “Known bills”.
These are things like your rent, car insurance, phone bill… whatever actual bills come out of your account every single month that you know don’t change that much.
And even if you’re not moved out and don’t have many of these expenses or bills, this is still good to do. Your expenses will just be lower.
This is a good place to start because this is pretty much the bare minimum you know you’ll need to have in your account each month.
The next category can be “groceries.” This is something that likely changes each month slightly, so you can track each of your grocery trips.
The next category can be “going out.” I usually only include my going out-to-eat expenses here that way I can track how much I’m spending on fast food.
If you want, you can add fast food expenses onto your grocery bill, and instead have your “going out” category be things like trips to movies, the bar, or anything you consider to be “going out.”
It really just depends on how you want to separate things in your budget.
The last category to have is “other” and this is where you can put expenses that are very infrequent. A trip to the salon, or buying presents during the holidays.
Essentially just miscellaneous expenses that you pick up throughout the month.
Once you do this, especially for a few months, you’ll really start to see where your money is going and if there are any places you can cut back on.
2. Track your income
The next step to mastering your money is to start tracking your income.
This is something that may change month to month if you’re working part-time over full-time but what you’re bringing in every month is important to know because this will be all the income you have to work with.
Do you want a super simple way to track all of this information? Here’s an easy solution! I’ve got a budget tracker for sale that you can download and use.
It has room for all your income, expenses, savings and debt to be easily tracked each month. There’s a sheet for single households, and couples as well! Check it out here:
3. Determine how much extra income you have
Now, this is the eye-opening part in the process of mastering your money. All you need to do is subtract the bills you have from the income you make.
I always start by just subtracting my known bills from the income so you can see how much you’ll have left to budget with.
I did this with a friend and we found out she had over $2,300 left to work with! That’s a lot of money that just went missing over the month because she wasn’t keeping track of it!
So, hopefully, you have a lot left over after your known bills as well.
This will help you to create a budget with the leftover money on food, going out, and to start building up savings.
That is the basic foundation you need in order to start mastering your money and creating a budget, so next let’s talk about some budgeting tips.
Now that you know where your money is going, you can better plan for what to do in the future.
1. Start slow
If you’re brand new to budgeting, my first tip is to start slow. The budget you create today will likely change in the future.
For example, if you currently spend $400 a month on going out, don’t try to get down to $200 or even fully cut out going out to eat right away.
If you can, that’s great. But going out to eat is likely a habit for you, and one that may be hard to break. So I suggest starting slow.
Instead, set a goal of only spending $300 going out one month.
Or if you go out 5 times a week, maybe cut that down to 3, go to a less expensive place, or even try just paying attention to the prices and ordering something less expensive.
Then, once you have that down, you can cut out even more if you’d like.
Budgeting and saving are habits you need to build, and ones that are likely not going to happen overnight.
If you change too much too soon, you may end up giving up and going back to your old habits when it gets too hard!
2. Prioritize your expenses
The next thing you can do to start working on a budget is prioritizing your expenses. Which ones are the most important that you have money for?
The obvious ones are going to be big bills like rent, utilities, and food. The non-negotiable item you need.
Then from there, you can cut out unnecessary expenses.
Cut out going on such an expensive shopping spree, getting your nails done less often, or choosing less expensive places to go out. Whatever you need to do.
Now I’m not going to tell you that you need to cut these out of your life completely, that’s unrealistic and not very fun.
In my opinion, creating a budget is more about realizing where your money is going, and cutting back on overspending but not cutting fun things out of your life completely.
If you like to go to concerts then go to them. But maybe you prioritize which ones you go to, or sacrifice having a seat further away to save money.
If you like to get your nails done, maybe get a less expensive design or go less often.
Sometimes when people think of budgeting they think it means cutting out the “$5 coffee and avocado toast” right? That’s what you always hear?
But it’s not. You can still have things you enjoy just in moderation!
3. Decide on a savings plan
One other thing you want to decide on is a savings plan. You likely want to set yourself up better in the future right?
And having a savings account, with a plan for how to grow that savings can get you out of some tough spots when you don’t have enough money or unexpected things come up like a car repair.
The first step is to consider what you plan to do in the future.
Maybe you want to save up for a new car, maybe a house. Or maybe you just have a savings goal for a rainy day fund.
Whatever it is, it’s good to have a plan for how much you want to save, and it needs to be realistic for how much you make.
Once you look at your budget, you can determine how much will be left over to save. And if you can, automate it!
4. Automate your Saving
Every job I’ve ever had has given me the option to connect two bank accounts.
If your job has something like that as well, you can auto-deposit a portion of your check into savings and the rest goes into your checking or main account.
This is the best option because you won’t even have to think about it.
You won’t miss the money because you never saw it hit your main account, and you won’t forget to save it and accidentally overspend each month.
And by far the most important thing you need to save for to start is definitely a rainy day fund.
If you’re not sure what that is or how to get started, check out this blog post right here!