You need to draw up a budget.
Why you need one
You may be telling yourself “I’m still young, why do I need a budget?”. Well let’s explore that, shall we? If you ever want to get into responsible financial habits, the earlier you start, the easier it will be. And setting up a budget isn’t as difficult as it may seem, there are many budgeting apps that you can download right to your phone and do everything from there.
If you stick to your budget, you’ll be saving money every month that will most certainly help you in the future or in case of an emergency. You’ll never spend more than you can afford to. You’ll survive every month and learn the value of money the easy way and you won’t have to stress about your finances for the month and end up digging under couch pillows to find a few cents (that won’t help you in any case, let’s be honest).
Start by writing out your income. So, your salary from work (minus PAYE tax), allowance from your parent’s while you’re starting out and any extra side hustles you’ve got going for you that bring in some money every month. Seeing as it’s your first job, chances are you’re not earning a crazy amount of money but it’s income nonetheless and everyone’s got to start somewhere.
Tally it up and see what you have to work with. Don’t be too quick to smile at the total amount because we’re just about to get into the expenses.
So, this is basically the point of a budget – to see where all your money is disappearing off to every month. Bring out the bank statements and receipts and calculate all your expenses. ALL of them.
An easy place to start would obviously be your debit orders and monthly bills, like your gym membership, internet provider, mobile contract, insurance, debt payments and rent. And then include how much you spend on utilities, petrol and groceries for the month.
But it doesn’t end there. You also need to work out the average amount of money you spend in general throughout the month. So, print out your bank statements from the past six months, add all your expenses together and divide it by the six months to get an average expense amount.
Now look back at your income total. Still smiling?
Another “expense” to add to your monthly expenses would be your tithe. 10% of your salary that goes towards a charity, organisation or good cause event. “Tithe” is a more biblical term, but it basically comes down to contributing towards something that matters. Think of it as your “I’m a good person” justification. There are various organisations out there, like Doctors Without Borders for example, that are doing amazing things and in need of donations. If you can’t find time to volunteer somewhere, you can still do your part.
It’s a great habit to have and if you look at the statistics, the fact that you have a job and are able to plan a budget makes you more fortunate than a lot of people in the world. Buy fewer coffees in the week and you’ll be more than able to afford your “tithe” every month.
Savings and money goals
Another pocket to have in your budget is for savings and money goals. At least 20% of your salary should go towards savings and there’s no backwards way around this. You can’t decide, at the end of the month, that whatever is left you’ll put away into your savings account. Sorry, but you’ll never be savvy with your money with a mindset like that.
There are so many ways in which you can save money every day. And the more money you save towards financial goals, the more proud, exciting, responsible, free and ballin’ you can (rightfully) feel.
Then, after all of that, you can see what money you have left to play with. This is where your “flexi” spending comes from and is a set amount that you’re just going to have to make work. If you can carry it over to the following month, that’s even better.
As you excel at work and find more ways of bringing in an income, you’ll have more to play around with, but it won’t happen overnight. Unless you win the lottery, in which case you’d need a whole new budgeting plan.
Just make sure that when you set up your budget, that you’re realistic and honest with yourself. Otherwise, you’re just going to be extremely disappointed in yourself.
You need to know that it’s okay if you struggle to stick to your budget in the first few months. It’s a lifestyle change that you will need to get used to. And saving money will become easier and you will eventually find a way to make the most of what you earn.