A budget is the cornerstone of responsible financial planning. Budgets are especially important for Millennials who are in the process of transitioning into adulthood and joining the workforce with substantial student loans. Whether you are just out of school or have been in your career for several years, it’s important to create a budget to live a financially healthy life.
How to Create a Budget for Millennials
What is a budget? A budget shows exactly how much money you have, where it’s being spent, and allows you to live within your means while accomplishing your financial goals. Here are some tips to creating a budget:
How can a budget help? A budget can help you find ways to save money and plan for the future.
How do you create a budget?
- Identify how much money you have coming in. Be sure to subtract deductions such as taxes, Social Security and 401(k) from your yearly salary to find your net income or take-home pay.
- Track all spending. Use a budgeting worksheet and separate your spending into separate categories such as living expenses (food, clothes, entertainment, etc.), secured debt (rent, student loans, auto loans, etc.) and unsecured debt (credit card, personal loan, medical bills, etc.).
- Set a goal. Create a list of all the goals you would like to achieve financially whether they be long-term or short-term. Prioritize and choose which ones you can handle at the moment.
- Map out a plan. Take a look at your budgeting worksheet and look for areas that you can cut back on spending. Identify needs vs. wants to achieve your financial goals and make the necessary adjustments.
- Keep reviewing your budget. Make sure to review your budget on a regular basis to ensure you are on track to achieve your goal. Some life events, like increasing expenses or getting a raise, may require changes to your budget.
You may have goals and dreams, but if you don’t set up guidelines for reaching them and don’t measure your progress, you may end up going so far in the wrong direction you can never make it back. Stay focused and on budget!