If you’re a teenager, setting up a budget probably isn’t at the top of your to-do list. But learning how to set up and follow a budget now could have a dramatic impact on your chances of reaching financial success as an adult. For help getting started on your budgeting goals, simply read the tips below!
Step One: Calculate your monthly costs.
Before you can set up a sensible, realistic budget, you must first determine how much money you typically spend on a monthly basis. The best way to figure this out is to write down all of your expenses and purchases for one month, and then add up the total.
Step Two: Determine your average monthly income.
Though most teens don’t have a consistent source of income, it’s usually possible to get at least some
sense of how much money you make in a given month. Simply jot down any allowance you receive or income you earn for one month, and then—just as you did in step one—add everything up to figure out your average monthly income.
Step Three: Analyze your saving and spending habits.
The next step in creating a successful budget is to review your average monthly costs and income. First, take a moment to ensure your income exceeds your expenses. If not, you should immediately try to figure out ways you can cut back on spending or increase your income. (Step four may help you determine if there are certain types of expenses for which you can reduce your spending.)
Step Four: Separate your expense categories.
Typical budget expense categories include housing, food, transportation, entertainment, clothing, etc. As a teen, you’ll likely find that not all of these expense categories apply to you, but a quick glance at the monthly expense sheet you created in step one should help you figure out the categories needed for your specific situation.
Step Five: Allocate your funds.
For each expense category you noted in step four, determine the maximum amount of money you can spend in that category per month. Of course, you’ll want to make sure the total amount doesn’t exceed your income! And don’t forget to also set aside in your budget an amount you plan to save each month. At a minimum, you should try to save at least 10% of the money you earn.
Step Six: Track your progress.
At the end of each week, review your expenses and determine if you’re staying on track with your budget. For instance, if you’ve already spent 75% of the money allotted to your entertainment category by the end of the first week, you’ll know you need to be wary of any additional entertainment expenses so you don’t exceed your budget goals for the month. Also, as you become older—and your income and expenses increase—you’ll want to keep checking and revising your budget to ensure it continues to meet your needs.
It’s true that setting up a budget can take some time, but the rewards of good financial management will one day pay off in a big way! Have more questions about budgeting basics? Stop by any Fidelity Bank. We’d love to help!