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How To Budget Money In Your 20s
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Being in your twenties can be the most rewarding and challenging decade of your life. Sometimes, when age is brought up, it’s said that being just out of your teens is a great time to experience everything you can. You aren’t tied down to a big family, you don’t have a mortgage to pay every month and you’ve still got good health and lots of energy.

While this is true for a lot of people, being in your twenties can present financial difficulties that keep you from enjoying your youth like everyone encourages you to. If you went to college, you’re probably in the majority of young people who have the heavy burden of student loans to pay off. You’re also probably struggling to understand how to budget money and to pay your bills while preparing for future expenses and dealing with present ones.

Why You Should Budget

Budgeting is a topic most people don’t talk about. You probably never learned how to budget money in school, and unless you have the money to attend a personal finance seminar or happen to be a whiz with numbers, budgeting and coming up with a detailed spending plan can be an intimidating process to figure out on your own, which leads most people to decide to get their finances and personal budget straight sometime in the future.

Don’t wait for the future! You are completely capable of handling your hard-earned money through a spending plan gets the bills paid each month, feeds you what you like and preps you for future expenses and a financial goal. There are some easy tips and terms to know to get you started, and then you and your calculator (and maybe a budget worksheet) will be budgeting the day away and working toward your financial goal — and sleeping well at night because of it!

Steps to Budgeting Effectively

1. Figure out Your Expenses 

This step seems easy. Rent, water, electricity. Done, right? Not so fast. Bills are, of course, some of the biggest expenses you face each month, but you’re also having to regularly spend money on things that don’t come in an envelope in your mailbox. Think about how often you fill up on gas or what you buy at the grocery store each week. Those purchases add up too.

Consider all your necessary expenses.

Try to gauge what you’re routinely spending money on and make a list. Common expenses could be:

  • Gas
  • Groceries
  • Pet expenses
  • Prescription medications

Estimate the cost.

Write down rough estimates for how much each of these costs you, and then add it to however much your monthly bills add up to. This will be your general expense cost to deduct from your overall monthly income. After you subtract that, you’ll know how much you’ll have leftover for whatever your goals are, like building a savings account or saving for a vacation for later in the year.

The tough part about starting a budget is that you don’t know the exact amount of money you’ll be paying each month since things like water and electricity bills can change. However, if you have previous bills that you’ve saved, you can estimate your bills off those you’ve already paid. This way you’ll know a safe number to start off within your budget, but keep in mind that they aren’t set in stone.

2. Determine Which Expenses Are Unnecessary.

It’s time to be honest with yourself. Now that you know what necessities zap money from your wallet each month, what are your problem spending areas? Maybe you like to shop online too often or like to go overboard on interior decorations to make your home feel more cozy and welcoming.

 List your unnecessary expenses.

Whatever it is, think back over the last few weeks and make a list of what you bought that isn’t completely necessary. Once this list has been made, keep it pinned up somewhere you can see it, or make a mental note to stop yourself next time you try to buy whatever is on your list.

 Use the list.

Afterward, make your budget something you can always access, instead of just math in your head or numbers on a scrap sheet of paper. Some people enjoy budgeting by using a monthly planner and writing everything out, color coding and numbering to their hearts’ content. Other people take advantage of some of the popular budgeting apps so they can crunch numbers on the go.

A good idea is to try both ways, handwritten and computerized. You never know which might make things easier for you, and at the start of the budgeting process, getting all the help you can is never a bad thing. Even if you think you’ve found a way that works, continue exploring before committing to it. Your needs may change with time, and you should know all the options you have to make a positive, financial change to your life.

3. Define Your Goals.

Why are you budgeting and keeping track of your finances? Is it so you can get by every month based on your monthly income or take-home pay, or so you understand how to manage money better? Or are you trying to save money for something in particular? These are good reasons, but they probably won’t be enough to keep you budgeting in the long run. Instead, make some goals that get you excited and are financially reasonable.

An example of a positive goal for your personal budget would be to set a date for a vacation in the future. Plan to go to the beach or visit a big city. Calculate how much extra money you’d need for traveling, lodging, eating, and activities, and then use that to keep yourself on track. The next time you want to binge buy meal deliveries every night, you’ll think about how much you’d rather be on that vacation.

Beware the negative goals. Don’t set bars you can’t reach. Your first goal in your twenties shouldn’t be to make a million dollars in the next three years. You’ll overwork yourself and become frustrated with your progress. Keep in mind the practicality of your goals and then put them where you’ll be reminded of them every day.

4. Set Some Limits.

Sometimes setting goals isn’t enough to keep yourself from stopping by the store and buying ten pairs of shoes you know you’ll never break in. When you’re feeling down, it’s so easy to just pull out your debit card and swipe away. Set some limits by leaving your debit card at home and only spending cash. This will keep you from spending because you’ll literally see the money leaving your hand, and you’ll also probably not want to go back to the ATM for more.

 Limit debt.

It’s also a good idea to limit how much more debt you’re able to rack up. If you have any credit cards that don’t have monthly payments on them, take some scissors and slice them up. You’re better off chipping away at the debt you have without having the possibility of creating more. Once you pay off your credit debt, plan to slice those up as well. Always keep a minimum of one credit card in your name for things like hotel reservations, but don’t rely on it for continual purchasing.

 Break bad spending habits.

When you’re just starting off with your first budget, you may even need to go to some extremes to break bad spending habits. If you find yourself needing to leave debit cards, credit cards and cash all at home while you go about your daily routine, don’t get down on yourself. Planning specific days to spend money can be a great thing! Whatever keeps you working towards your future by sticking with your budget shouldn’t be anything to be embarrassed about.

At some point, near future or distant, you’ll be used to your budget like a favorite pair of jeans, and you won’t need to set limits on yourself because they’ll feel like the norm to you. Everyone can get there if they give themselves time to adjust. Going from no budget to a tight one is a big jump, and it would take time for anyone to get used to no matter what their old spending habits used to be.

5. Stay Motivated.

You’ve got a rough budget, plans for the future and some basic limits to keep your money from disappearing right after your paycheck lands in your bank account. Even that might not be enough! Everyone needs motivation to get things done, and budgeting is no different.

 Consider what motivates you.

Take a second to ask yourself what motivates you. Maybe a future vacation isn’t enough to keep you within your budget day today. You might need something more immediate to challenge yourself to keep your money in your bank account. An idea to try would be to take a look around deal stores like the Dollar Tree and see what you can get for cheap. Desserts? Books? House supplies? Reward yourself with one treat at the end of each week to pat yourself on the back for saving extra money.

Change your perspective.

Another way to stay motivated about your budget is all about shifting your perspective. Your purchases and your debt affect more than just yourself. They can affect your friends, family and loved ones too. Try making your weekly treat going out with a friend for a cup of coffee. It won’t break your budget, and having a budget partner will help keep you accountable.

Maybe at the beginning of your budgeting experience, plan for free activities, like hiking a local trail or spending time with your dog at the local dog park. Anything that breaks routine without hurting your budget can be used as motivation at the end of a long week of counting pennies. Don’t skip out on your personal encouragement! It could be the only thing that helps you turn your budget into a lifestyle.

6. Think Ahead.

All of this may sound great, but after you know your monthly expenses, how are you supposed to figure out how to budget for things that may not immediately apply to you, like emergency savings or college savings for your kids?

The first thing to consider is the time of life you’re in. In your early twenties, you should be focusing on making your monthly payments and building a savings account. The purpose of this savings account should have two parts: first, it should be something for you to fall back on in case you lose your job or have to move. Second, it should be a source of emergency savings.

As the name suggests, emergency savings is only to be touched in the case of a true emergency. For example, you suddenly find out you need to replace your tires or your apartment gets broken into and you have repair fees. Maybe you get sick and have doctor bills that come as a complete shock. An emergency savings — try to have a minimum of six-weeks’ pay or calculate yours directly — should help make you feel comfortable about unknown events that might happen later in life.

Then you might start thinking about your savings goals and how you might eventually own a house someday. Before you get overwhelmed, there are online calculators ready to help you figure out any money issues you could come across in the future. Some might even make you consider expenses you never thought about, and the more you can prepare for, the more relaxed you can feel. 

Budgeting in Your Twenties: The Bottom Line

In your twenties, everything is new and a little scary. You’re probably feeling like you’re constantly making blind decisions, just because you’ve never done anything similar to renting your own apartment or paying for your own bills before. Even if you don’t have anyone that taught you anything about money, being financially successful isn’t impossible in your twenties.

The key is learning how to budget, and that means figuring out what kind of budget works the best for you (the personal in personal finance matters!). Give yourself some time. Setting up a budget is going to be a process of trial and error. Bills and needs change, and you’re probably going to have to make adjustments to your first couple of drafts. That’s normal! No one is able to budget perfectly the first time around, and no budget is consistently perfect month to month.

What matters is that you’ve got your basic expenses down so you have a general sense of you monthly budget, and that you’ve locked yourself into the amount of money you give yourself to spend each week. The only thing that can ruin a budget is stepping outside the parameters it gives, which is entirely up to you. Bring in a family member or friend who can hold you accountable if you need to. If you really want to make your budget work, you will, no matter your age.

Further Reading

Want to figure out this whole budget thing once and for all? Check out our other resources for making a budget that works for you and helps you meet your financial goals.

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If Saving Isn't Your Strong Suit, the 50 20 30 Budget is a Must

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7 Money Management Apps to Help You Budget, Stop Overspending, and Gain Control

Access your accounts in one place, track your spending, and manage your expenses. These apps will help you do everything money-related.

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Sarah Landrum is an expert career blogger and the founder of Punched Clocks, a career and lifestyle blog helping professionals create a career they love and live a happy, healthy life. For more from Sarah, follow her on social media and subscribe to her newsletter.

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