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Budgeting in your 20’s can seem like a daunting or boring task at first.
You’re likely dealing with a lot of bills, and a job that might not cover them all. You’re looking to have fun, but also are worried about that student loan debt that feels like it’ll never go away.
And forget trying to buy a house! All of your financial goals might seem so far away.
But they don’t have to be.
Creating a budget doesn’t need to be difficult to do, and it’s essential to start budgeting in your 20’s if you want to set yourself up for a better life later on.
So, if you’re in your 20’s and looking to master your finances, build up savings, or just get better at budgeting, this is for you!
These are the things that I’ve done to get my finances together over the last year or so and can help you do the same!
Budgeting in your 20’s: How to Create a Budget for Beginners! In order to start creating a budget, you need to do a few things first.
Like understanding where your money is going, how much you are bringing in, and what basic things you need to spend money on. Like your rent, utilities, and other bills.
Once you have all of that figured out, you can start working on creating a budget for yourself. Let’s break it all down.
1. Understand where your money is going The first big step to budgeting in your 20’s is to understand where your money is going. It’s really hard to keep track of something if you don’t even know 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 bills come out of your account every single month that you know don’t change that much. This is a good place to start because this is the bare minimum you know you’ll need to have in your account each month.
I also make sure to write down when they come out as well. Like the week and roughly the day. That way you’ll know exactly when this money needs to be in your account, and leaves less risk for overdrafts.
The next category is groceries. This is something that likely changes each month slightly, so it’s a good idea to start tracking each of your grocery trips.
That way over time, you can start to predict how much you’ll spend.
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 going out to your grocery bill. Or if you want to have a “going out” category you could also add in trips to movies, the bar, or anything you consider to be “going out” .
It really just depends on how you want to separate things out.
| READ MORE: Mastering Your Money- How to Budget and Save in your 20s!
The last category I have is “other” and this is where you can put expenses that are very infrequent. So when I get my hair or nails done, if I’m buying a birthday present or getting my car taken to the shop.
Things you don’t expect to happen very often- miscellaneous expenses.
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!
TIP: If you have any credit cards, it’s also a good idea to track what you’re putting on those as well. Just because it goes on a credit card and doesn’t come out of your actual bank account doesn’t mean it doesn’t count!
2. Track your income The next thing you need to do is start tracking your income.
This is something that likely changes every month, but it’s obviously important to know because this will be all the income you have to work with.
And this is obviously a lot of information, so how do you keep track of it all?
There are a lot of things you can do. Writing it down in a notebook, using a budgeting app, or what I do personally is use Google Sheets.
I think this is one of the easiest ways to keep track of budgeting in your 20’s and also keeps everything organized.
If you’d like to use the same tracker that I have, I created a Google Sheets Budget tracking bundle for sale in my shop!
I’ve made it super simple to follow, and easy to calculate everything out. I added formulas to some of the cells in order to do some math for you and keep track of everything in a super easy format.
There is a couple’s budget tracker in there, along with one for a single person as well! If there is anything harder than budgeting in your 20’s by yourself- it’s budgeting with another person.
So I’ve made that as easy as possible in the budget tracker which you can check out right here!
3. Determine how much extra income you have Now, this is the eye-opening part. All you need to do is subtract the bills you have from the income you make.
I always start by 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 at the end of the month!! 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 decent amount left over after your known bills come out.
This will help you to create a budget with the leftover money on food, going out, and start building up a savings account.
Budgeting in your 20’s- Tips to Get Started Those are part of the basic foundation you need in order to start mastering your money and start budgeting in your 20’s, so next let’s talk about some budgeting tips.
Now that you know where your money is going, how much you need, and what you’ll have left over, you can better plan for what to do in the future.
When you start budgeting in your 20’s, start slow If you’re brand new to budgeting, my first tip is to start slow. The budget you create today may 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 three, go to a less expensive place, or even try paying attention to the prices and order something less expensive.
Then, once you have that down, you can cut out even more if you’d like.
This was one of the hardest things for me to cut out was going out to eat. I love it. Which is why I always make room for it in my budget. But there are times when it gets to be too much and you need to cut things out.
However, 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!
Of course though, everyone is different. You may have different habits or priorities than me and can cut things out altogether!
Prioritize your expenses This is why it’s important to prioritize your expenses when you start budgeting in your 20’s. 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. These are not things you can just cut out of your budget.
But I am a strong believer in living life and not being so strict on what you spend. Sure, you may need to cut back, but if you wait to live your life until you have everything together, your finances are in tip-top shape, and you have no debt… you may be waiting a while.
Sure, being absolutely perfect in everything you do financially will set you up even better in life in your 30s, but I personally don’t want to prolong having fun until that point and then I wake up one day to notice my 20’s are literally just… gone.
This isn’t me saying be irresponsible with money… buuuuut also don’t stress too hard about having a bit of fun too, okay?!
Make sure your necessities are taken care of, and then don’t be afraid to spend some money on fun!
With that being said, here is how you can be a bit smarter while you are budgeting in your 20’s.
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Cut out unnecessary expenses Cut out going on such an expensive shopping spree, getting your nails done less often, or choose a less expensive place when you go out.
Like I said, 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, 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.
Most times when people think of budgeting they think it means cutting out the “$5 coffee and avocado toast” right, that’s what you always hear? Cut out all the fun things from your life and don’t get the chance to enjoy anything
But it doesn’t have to be that way.
As long as you aren’t down too bad, always behind on bills, can’t afford food, or your phone is always getting cut off because you can’t pay the bills… You can still have things you enjoy- just in moderation!
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.
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!
Automate your savings 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!
Budgeting in your 20’s doesn’t have to be hard. I actually find it to be a bit of fun! And don’t forget to check out my budgeting tracker sheet to help you get started!
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