Fellow young people, there is an essential skill that no matter how far you run from it or hide from it, it will find you. And that is, managing your finances. When planning your finances, budgeting is a critical component that will help you create a strategic roadmap that will help you achieve your goals financially.
Why does budgeting matter? Budgeting allows you to track your income and expenses, so you know how much money you have left to spend after you’ve paid your bills. It helps you stay on top of your finances, avoid overspending, and save for future expenses or emergencies.
By creating a budget, you can identify areas where you may be overspending and adjust your spending habits accordingly. So here are some practical tips that can help you budget and create a financially bright future for yourself.
Have you heard of the 50/30/20% Budget rule? The idea behind this rule is that you divide your earnings into three categories; spending on needs, spending on wants, and savings.
Let’s break it down
50% for needs, This category includes essential expenses such as rent payments, utility bills, groceries, transportation, and other bills that you must pay to maintain your basic standard of living.
3O% for wants, This category includes non-essential expenses like dining out, entertainment, vacations, and other types of spending that you can live without but still enjoy.
20%for savings, This category includes money that you set aside for future expenses, emergencies, retirement, or any other financial goals you may have.
By allocating your income according to this budget rule, you can ensure that you are spending within your means while also saving for the future. It can also help you prioritize your spending and avoid overspending on discretionary items that are not necessary.
Of course, everyone’s financial situation is different, and this rule may not work for everyone. However, it can be a useful guideline to get started with budgeting and help you make more informed financial decisions.
While the 50/30/20 budget rule is a useful guideline, it’s important to note that it may not work for everyone. Depending on your individual circumstances, you may need to adjust the percentages to fit your specific needs.
When creating a budget, it’s important to track your expenses carefully and regularly. This can be done using budgeting apps, spreadsheets, or pen and paper. By keeping track of your spending, you can identify areas where you may be overspending and make adjustments accordingly.
Another essential aspect of budgeting is setting financial goals. This could include short-term goals such as paying off a credit card or saving for a particular thing that you want, or long-term goals like buying a house or car, bike and other things. By setting specific goals, you can create a plan to achieve them and stay motivated to stick to your budget.
It’s also essential to review your budget regularly and make adjustments as needed. Life circumstances can change, and your budget may need to adapt to accommodate those changes. For example, if you get a raise at work, you may want to increase the amount you save each month.
I can’t finish this off without saying you should not forget to celebrate your financial victories, no matter how small. Paying off your student dept or reaching a savings goal is a significant achievement, and it’s essential to acknowledge your hard work and dedication.
