Budgeting & Taking Control of your Finances
Budgeting & Taking Control of your Finances
Don’t “wing it” with your finances
When running a business or managing your personal finances, you need to have a big picture understanding of your money. It seems like money is the center of everyone’s stress, right? It may even feel easier to ignore it all together and just go with the flow when spending your money. The problem with this attitude is that every dollar you spend can begin to add up quickly.
Five dollars here and there may seem like nothing at the time. If you were to look closer at the grand total of your spending five dollars a day turns into $35 a week, which turns into $140 a month...calculating for a grand total of $1,680 a year.
Even as high school students, it is so important to start building these habits now.
Make a plan
Before you begin breathing into a paper bag as you begin to look over your finances; remember habits take time to build and there is always time to make a change in your spending. You do not need to wait till January 1st of a new year to make these changes. The best time to start is right now.
The first step is to create a plan and a budget for yourself.
Download a free financial planning app such as Mint or Pocket Guard to help you track your transactions/follow your budget. (If you are more visual, make a spreadsheet.)
Make a list of every bill/costs you need to pay each month on average (if you currently have no bills, ask your parents what type of bills to expect when you leave their house. Have them walk you through all of the bills they currently have.)
Make a list of revenue that you receive each month on average. (Part time job, allowance, side hustle).
What will you spend?
It helps to begin to categorize your spending. For example: food, gas, entertainment, clothes, subscriptions, phone, school supplies, entertainment, etc. As you begin your life outside of your home, this list will slowly grow. Getting a handle on your spending now, will help you as you branch off into your adult life.
Your first year creating a budget, your estimations will be far from perfect. It’s hard to know what you will spend on something if you have never done it before. Your best tool? Google it! Look at a couple different sources to give you an idea of what it costs per month. There is much research done around spending in America.
For more subjective areas, like entertainment, think about how many times you spend a month on things that are not a necessity but for your own entertainment. Sometimes when you actually sit down to look at all of the numbers it may be a surprise.
How much money do you want or need to make?
Before you get to your “wants” it is necessary to figure out how much money you need to make to pay the bills. Once you calculate how much you plan on spending that is how much money you need to make from your business or your job.
For example, if you lost your job or your income tomorrow, how much money do you need to pay for all necessities? This means: rent, health insurance, phone bill, food, gas, student loans, credit card bills, etc. These are unavoidable expenses for everyone.
Once you have a number for what you need to make, now you can budget out additional items that you want to have in your budget. Create categories for your wants such as: hair appointments, subscriptions (like Netflix), going out to eat with friends, vacation, shopping, and anything else that is not necessary for your survival.
Take action and hold yourself accountable
It’s time to put all of these numbers somewhere.
Start somewhere simple like an excel document or an app on your phone
Begin keeping track of what you spent and what you earned each month.
Create goals for your spending and monitor them closely.
Stick to your budget! Not everything will go perfectly but do your best to stick to your budget. If you set unreasonable goals for yourself then make adjustments as you go along.
The more you create goals and budgets for yourself the stronger your financial management will be with time.