Venturing out into the world as a young person is exciting, to say the least. Still, it comes with responsibilities you may not be prepared for. Budgeting, careful shopping, boosting your income, avoiding debt — do you feel ready? If you’re unsure, Accounting Page has a guide to help you. So it’s time to discuss keeping yourself and your wallet protected – advice for your people starting out.
Creating a Budget
Start by tracking your current spending, ideally for two months or more. You’ll end up making two lists, the first being specific to how you’re living your life right now and the second being your future expenses. For your first list, add up the amount of money you spend on:
- Going out to eat
- Gym membership
- Buying new clothes
- Purchasing gifts for others (significant others, for example)
- Snacks
- Entertainment (movies, admission to theme parks, etc)
Take note of anything that you seem to be overspending on or anywhere you can trim expenses. Maybe you don’t need to eat out as much, or you decide you don’t need a gym membership. Remember that these expenses will be added to the contents of your second list — your future expenses — so cutting back early will only help you.
A good idea is to include a “Self-care” category in your expense list. This can be extremely important because if you aren’t taking care of yourself, it will be more difficult for you to take care of your life and expenses. Self-care looks different for everyone and may already be a part of your list (e.g., going to the movies can be self-care as well as entertainment). Don’t go overboard with this part of your budget but don’t underestimate it, either.
Next, it’s time to set up your new budget. In addition to the above expenses, this list will include items like:
- Rent
- Car costs
- Home or renter’s insurance
- Savings
- Groceries
- Internet and cable
There will be some items you won’t be able to nail down numbers for (utilities change each month), so make estimates as best you can. Call the cable company and find out what kind of deals they’re running or ask to see your parents’ internet bills for reference. As usual, the internet will be your friend, as well.
When you have an established current + future budget, you’ll want to assess your job situation. If you already have one, inquire about possible opportunities for advancement like supervising or managing positions. If you can’t advance or if you don’t currently have a job, navigate listings carefully. Look for well-paying positions, naturally, but also consider things like flexible hours, especially if you’re also in school.
If you are in school, start with part-time positions unless they won’t cover your monthly budget. If you’re diving right into the full-time working world, be prepared for more responsibilities and higher expectations. Don’t be afraid to apply for a job if you have little-to-no experience; many companies will be willing and able to show you the ropes.
Spending Wisely
Now that you’ve broken down your budget, you know just how much you can afford in each category. Start with finding a place to live, as this is most important. Browse online at apartments and houses that meet or fall below your maximum for rent. Consider amenities such as gyms, recreation rooms, utilities and/or internet included in rent. Look around carefully and compare which home meets your needs.
If you save to the point where you feel comfortable purchasing a home, be wary of offers that seem too good to be true. You may encounter a property being sold “as-is”. This kind of stipulation can prevent you from having a home inspection after entering into a contract or being able to request repairs from the seller. If you do plan to make an “as-is” purchase, make sure you have all the relevant information going in.
Next, a car. If you’re a first-time car buyer, remember to factor in all the costs of owning and operating a car: car payments, insurance, gas, and maintenance. You’ll want something durable and gas-efficient. In addition to online listings, check Consumer Reports and Kelley Blue Book so you know a good deal when you see one.
Finally, you should also be watching your spending at the grocery store as it’s easy to get carried away. There are numerous ways to save money at the market, including:
- Buying dried instead of canned
- Planning meals based on what you already have
- Shopping with a calculator
- Clipping coupons or using coupon apps
- Using price comparison apps
- Buying in bulk
Don’t count out the money you can save simply by going generic; not only are the prices less expensive individually, but they’re also often on sale. For holidays and birthdays, ask for grocery gift cards.
Continue evaluating each category to see what your financial options are.
When shopping on your own with your first budget, err on the side of caution. Don’t push your budget to the maximum every month. The less you spend in one category, the more you can spend in another. You should also consider putting any extra budget money into your savings account. Whether it’s your long-term savings or a stash specifically for emergencies, you’ll appreciate the extra money one way or another.
Boosting Your Income
Even with maintaining cost-saving strategies and sticking to your budget, money can still be tight. Boosting your income, even if you are doing OK, is a great idea when you’re first starting out.
One common way to put more money into your pockets is by joining the gig economy. There are all kinds of phone apps and websites that can lead you to short-term, almost errand-like jobs. Ridesharing is a great example. You pick up a customer, drop them off where they need to go, and just like that you’ve made extra cash. The gig economy lets you work with flexible hours, so if your regular work hours fluctuate or you have classes to work around, it’s a great route to go.
It is important to remember the limits of the gig economy, however. For example, if you’re a food delivery driver, you should consider the mileage and potential damage your car could acquire, not to mention the gas money you need to even do your job. If you’re performing handyman repairs as a side gig, you’ll want to narrow down your service map so that you’re not driving far out of your way.
Perhaps the most major side gig you can have is starting your own business. Think about whether any of your favourite hobbies can be monetized. Perhaps you love to knit and live in a cold area — brand-new scarves will sell like hotcakes! If you’re an artist, consider selling some of your work or taking commissions. If you’re a straight-A student, offer tutoring services. The options are endless.
The trick to starting your own business? Money. You have a variety of options for funding, including applying for a business loan, looking for angel investors, getting advance commitments for work, crowdfunding, investing in savings, and getting a microloan. Combine one or multiple of these with your passion project and you can bring in the bucks.
Avoiding Debt
Staying out of debt isn’t just about your financial well-being. It can negatively affect your physical and mental well-being, possibly leading to drug abuse and addiction. If you’re overspending and find yourself short on grocery money, you’ll immediately worry and maybe even feel embarrassed.
The National suggests first paying off any student debt you may have. If you have multiple student loans, see if one has a higher interest rate than the other, and then direct your payments specifically to that loan. The quicker you pay off this loan, the less high interest you’ll pay. Either way, you’ll have high-interest rates, which is part of why you should keep this expense at the top of your payment list.
Building good credit is another way to get yourself out into the world. You may not think you’re eligible if you have a poor or no credit history, but you can try applying for a secured card. This process allows you to make a security deposit upfront, and that will often become your credit limit. Adding yourself to someone else’s card as an authorized user is another good idea, just make sure to use it for small purchases and pay them off immediately. Keep in mind that you’ll also receive positive credit gains for paying your rent, utilities, and phone bills on time and in full.
With hope, you feel more prepared at this point. It may seem like a whirlwind — budgeting, careful shopping, boosting your income, and avoiding debt are a lot to take on — but with the right resources and attitude, it can be easier than you think. For further help and advice, visit the Accounting Page today!
Featured image via Pexels
This post was kindly written by Ted from tedknowsmoney.com