How can I start budgeting: Financial Tips for Young Adults
How to get started on saving and investing in your future. There are lots of questions regarding budgeting. We will help you through this blog on financial tips for young adults
How can I start budgeting?
Human beings are planners. We love to plan every occasion even our daily timetable too. So why not plan our financial goals and how to achieve them. This is where budgeting comes in. We will try to answer how can I start budgeting in this blog.
What we earn and what we spend and save is all the crux of our financial stability. Our expenses generally fall in two categories – needs and wants. Needs are what we require no matter the financial situation. The things that comes under needs are food, housing, healthcare, transportation etc. We have to prioritize our needs no matter the situation first. The rest is want. We can spend on luxurious items, vacations or whatever we want but they would be categorized as want.
To start budgeting, you have to set aside the money for your needs, emergencies and then you can start investing and increasing your savings.
Some of the strategies that would help you in your budgeting are –
Self-Control – Art of delayed gratification has been proven by experts as the best strategy to keep your finances in order. You can buy an item on credit easily however it is better to wait until you have saved the money for that item and not end up paying huge interest. Credit cards are prime example of how you can end up losing it all. Although they are necessary but make sure to only use them in emergencies and keep track of them (credit buying) at all times.
Know your Investments – It is always good to keep track of which instrument you are putting your money in. Read books, gather knowledge and calculate whether your expenses are exceeding your income or not. The best way to do this is by budgeting. Calculate your daily expenses and you will realize that how big an impact they make towards your expenditure.
Emergency Fund – This is a golden rule you must always abide by. No matter how much you are earning or what your expenses are. Always save some amount for emergencies. Emergency fund can keep you out of financial trouble. Think of it as backup and only use it in the toughest of times. People have saved a lot in emergency fund.
Planning for Retirement – We generally don’t plan for retirement early. Our twenties are mostly fun time and people don’t think about saving for retirements at such an early time in life. However, in the thirties; its late. The compound interest works in an interesting way and the sooner you start your savings the better it would be for you.
Protect Your Wealth – These are small things but go long way in protecting your wealth. Protect your house by getting renters insurance to escape from unfortunate events such as Fire or burglary. Take a closer look at your portfolio too and check whether the investments are in the categories you have stated. Are they in high risk range or low risk range? Whether all of is in equities or Mutual Funds too.
Start Budgeting – Invest, Spend and Save
Here are few of the strategies to answer your question about how can I start budgeting?
The 50/30/20 Rule
It says to divide your net income into different brackets – 50% on needs, 30% on wants and the rest 20% towards savings.
The 50/15/5 Rule
In this you can spend 50% on your needs and debt repayments. But save 15% for retirement and set aside 5% for emergencies. The remaining 30% can go towards emergency fund and funds or whatever you deem necessary.
The Bottom Line
You need a discipline and a plan in order to save money. Only you can decide what are your goals, what are the necessities and how to budget to plan for the future. Read on financial expert’s advices, financial books and take advantage of the options available to you. Go through the above mentioned financial tips for young adults. These would help you in your quest to start budgeting and becoming financial independent. One more thing is to make sure some investments in assets that can be easily liquidated if time arises. Last but not the least, the help of a financial advisor would be a good way to start planning for future.