- 3 Powerful Budgeting Tips to Maximize Your WealthPosted 2 years ago
2 Simple Methods of Budgeting for Young People
While many families have monthly budgets, it can be difficult to teach the concept of budgeting for young people. While they may not have full-time jobs or as many expenses, budgeting skills are still essential for young adults. It is especially important for college students who are just striking out on their own. Here are two methods that can help teach you or the younger person in your life how to manage money.
10% Budgeting for Young People
If the task of budgeting seems a bit overwhelming, start with something that will be easier to accomplish before gradually increasing expectations. This will make it much easier for you to stick to your budget for the foreseeable future. Write down what you spend monthly on all of your expenses. Include gas, groceries, tuition, rent, utilities and entertainment, as well as any other categories that you spend money on.
To start simply, cut your spending by ten percent. You can determine how and where to make the cut and the ten percent can come from a variety of categories. Once you become comfortable with your new spending habits, cut another ten percent. The gradual change will help make you comfortable with following a budget.
You can also use the ten percent rule to add to your savings. Set aside ten percent of your income each month for your savings account. Use financial planning tools to help you see the difference that even a small amount of savings can make in the long run. If you have money left over at the end of the month, consider putting that towards savings as well.
For the best results, cut your expenses and increase your savings by ten percent. Again, as you get more comfortable with your new lifestyle, you can adjust your budget to cut even more spending and increase your savings.
Budgeting for Young People Using Percentage Planning
Some budgeting plans disregard absolute dollar amounts in favor of percentages, particularly when it comes to budgeting for young people. This is particularly helpful for high school or college students who may not have fixed income or expenses. Instead of cutting money from certain categories, you can focus on spending a certain percentage of your income on each area.
Popular financial tools can help you determine what percentages work best for you. On average, 30% should go to housing or rent, 15% for transportation, 15% for groceries and 7% on utilities. The remainder may be divided between healthcare, loan payments and entertainment.
Percentage planning is popular with young people because it offers a bit more flexibility than a fixed budget. You can also transfer unused percentages to other categories if you need to. Remember to set aside money for savings. This will help solidify your financial future while helping you prepare for any unforeseen expenses or emergencies.
Whichever plan you decide to use, be prepared to tweak it to suit your needs. Budgets have to be personalized, or else they won’t work. You should also be patient with your progress, because financial changes don’t happen overnight. You are learning new habits that will help you in the future, which is why budgeting for young people is so important.