You make want to ask yourself,
“Why do I need to budget my money? It seems so difficult sometimes, and I have enough on my plate as it is. Plus, I want to go out and have fun. I don’t want to spend what little free time I do have on budgeting my money. Do I really need to budget?”
Long story short…Yes. Yes you do.
More importantly is why and how you’re going to do so. That’s where we come in.
Budgeting is tough, there’s no doubt about it. No one wants to think about how they’re spending their hard earned money. They just want to buy that new pair of shoes, or that new bag or video game, so on and so forth. But, there will come a time when you don’t have the money to buy everything you want. Eventually, you’ll have more bills than you can even imagine. Luckily, it’s never too late to start budgeting your money. There are plenty of resources out there that can assist you and make your life easier. But, before we get to those, let’s establish why budgeting your money is so important.
First and Foremost – Having Fun (Responsibly): Budgeting your money will give you a better sense of what money you can spend on the fun things in life. You won’t have to question if buying those awesome pairs of shoes, this great watch, or even a bigger item, like a TV or vacation, will give you anxiety or buyers remorse. You’ll feel more confident in your purchase, and you’ll better be able to enjoy using the item or the experience itself. You’ll have greater peace of mind.
Second – Building Wealth: Budgeting your money allows you to better deal with your debt (which we’ll get to in another part of our miniseries) and build your wealth. If you’re reading this, you’re most likely a college student or at least still have some college debt. Thus, budgeting your money will help you in decreasing your debt and really building your wealth (in other words, getting richer…exciting, we know). Once you eliminate your debt, you can begin reallocating that money into building your wealth, possibly with savings and investing.
Third – Planning for Retirement: Yes, we know, you’re young and feel like you don’t have to plan for retirement because it’s so far away that you can do it later. Trust us, we felt the same way. But, we could not be more wrong. Planning for retirement is one of the most important things you should do when you’re younger. If done correctly, your retirement savings will have accrued enough so that when the time finally comes, you will be able retire with some peace of mind.
So, we’ve established some reasons why budgeting your money is important (though there are plenty more). Now, we have to determine how to do it.
First – Smartphone Apps / Online services: Almost everyone has a smartphone in today’s world, and there are plenty of apps / online services out there that can assist you in budgeting your money. One of them is YouNeedaBudget. Another is Mint. Both of these companies provide services that make budgeting and tracking your spending much easier for you. YouNeedaBudget does cost $5 per month or $50 a year, and Mint is free, but by using either service, you get a better idea of your spending habits and how much you should be budgeting.
Second – Create a Spending Diary: Although it’s a diary, you do not need a physical book. You just need some way to keep track of your spending habits. It is challenging, but it is important to have because you need to know how much you’re spending and what you’re spending your money on. Inside of the diary, you should have:
- Standard Purchases:
- Gas, food, movies, clothes, iTunes purchases, etc.
- Insurance (Car, health, etc.), credit cards, medical bills, cell phone bills, etc.
- Deposits and withdrawals for your respective back accounts, which includes accrued interest.
Third – Budget Strategies: If you don’t have a smartphone or would rather track your expenses by hand, then there are certain methods that can assist you in doing so. But, before we get to those, it is important to note that you should always save your receipts for big items, such as TV’s, laptops, cell phones, anything with a warranty, and at the very least (for smaller items), write down how much money you spent, and what you spent that money on. Getting back to the tracking methods, here are two:
- Calendar Method:
- When you receive a bill, mark the due date and how much is due on a calendar so that by the due date, you’ll be able to estimate how much money to set aside for the expense.
- This approach helps manage your cash flow.
- It can be used as a stand alone strategy or incorporated into other budgeting approaches.
- Envelope Method:
- Using this method can help you avoid debt.
- You are using a finite amount of money so you are working with what you have
- Set money aside for various expenses and place them in envelopes at the beginning of each month, week, or day.
- At the end of the month or week, transfer any excess money from the envelopes into a savings or emergency account.
- DO NOT take money from another envelope if you have already hit your maximum budget for one category.
- This can be done electronically using YouNeedaBudget or Mvelopes.
- Using this method can help you avoid debt.
If you’ve made it this far, then you are well on your way to becoming a budgeting master. However, there are plenty of other online resources that can help you along the way. *Psst, try out our Money Smart Seawolves page* If you have any questions, concerns, or comments, please place them below in the comments section. We’d love to hear from you about your experiences with budgeting.
It is difficult. We know. But, if you keep it simple and you really stick to it, you can drastically change how to live and spend responsibly. It’s your money. Take control of where it’s going. And, as always, stay SAVVY!