Intro to Budgeting

Budgeting is a simple and effective way for young people to take charge of their finances, no matter what job they have. 

It comes down to two aspects- saving and spending. The two best things young people can do with their finances is learn how to save early for retirement and big expenses down the line, and how to track their spending habits. Today, we will be taking about the latter. 

**While all of the information below can be helpful in various ways, these are all general rules of thumb and should be taken as an outline for how to structure budgeting, not an uncompromising set of rules. Each person has their own way of doing things, and a budget should let you feel free to spend what you need to up to a certain point, not feel suffocated.**

Twice a month, I go through my expenses in my bank’s app and input each expense into a goggle form, labeling each “Groceries,” “Out to Eat,” “Health,” “Apartment Expenses,” “Wifi,” etc. 

Many apps do this for you, and some banks even have this feature built into their website. In these apps, you can create automatic labels for different stores, like having CVS always be labeled “Health.” I also go through my PayPal and Venmo to see what I paid for and how much I got paid back for covering a bill at a restaurant. 

I decided how much to budget for each of my expenses by tracking my spending habits and finding an average to work with. If you are able to, you can go back to your expenses and see on average how much you spend on groceries, shopping, travel, and more, to give you a ballpark estimate of how much you should be spending. If that isn’t an option, spend a month tracking your normal expenses, making note of purchases out of the ordinary, and then taking the total (without the outliers) as your goal for the first few months. Every quarter, I average out the last 3 months of expenses to see if I have been over or under spending, and decide if I need to rearrange my budget. In general, my budget comes in about $50 under my income, so I have room for unexpected expenses, or I save it for the following month incase my income goes down (whether I finish a gig or work less hours at work). 

Here is a template to start tracking your spending. You can make a copy of the document for your own use. Everything in red has a formula to calculate your income and expenses, and you can personalize it as much as you need!

This system also lets you set realistic saving/spending goals, and can help you change your spending based on real information. By tracking your habits, you can learn where to focus on saving money, and where you know you are on track with. 

Budgeting can seem daunting and overwhelming at first, but once you find a system that works for you, it is empowering to know exactly how much you can spend on things, and helps you set realistic income goals to match your lifestyle, or to temporarily adjust your lifestyle when you don’t hit your income goals. Having a strong relationship with your spending habits is one of the best things college and post college professionals can have in their back pocket at they enter the workforce. 

Thanks for reading everyone, we hope this can be helpful to you.

Feel free to use the template and share this post with friends!

***Please Note: This is not official tax, legal, or investment advice. It is merely some information on one way to organize your expenses. Be sure to contact an expert on any tax-related, legal, or investment advice and do not take this as any more than general advice.***