It’s official. Money-savvy millennials are better at managing their finances than their parents and grandparents. When compared to baby boomers, people between the ages of 18 and 33 were more likely to track expenses and stick to a budget, a 2015 survey by T. Rowe Price found. Sixty-seven percent of young people follow a budget, compared to 55% of boomers.
If you’ve gotten the message about the importance of budgeting, congratulations. But if you’re among the 33% of young people who is never quite sure if there’s enough money in your checking account to cover the night’s takeout order, it’s time to get smart. Learning how to budget will reduce stress, help you cut wasteful spending, and make it easier to bounce back after a job loss or other money crisis.
Once you start budgeting, you’ll be able to use your money to do what you want, instead of letting it control you. Best of all, budgeting is easy to do, if you follow some simple steps. Here’s how to budget your finances like a boss.
Start by tracking your daily spending in whatever way works for you.
Online tools like Mint will sync up with your checking and credit card accounts, making it easy to track how much you spend and in which categories. Spreadsheets work too, or you could keep it ultra low-tech and simply write down everything you spend on a piece of paper or in a notebook.
The tool you use doesn’t matter as long as you log every single purchase. You need to know what exactly you’re spending money on, from rent to daily coffee runs, before you can move on to the next step.
Next, think about what recurring expenses you have coming up in the next month, like your car payment or student loan. Look back on your spending records from step one to get an idea of how much money you need to get by every month, and make sure it’s not more than what you’re bringing in.
Now is also the time to set some long-term goals. Credit card debt weighing you down? Resolve to pay it off. Want to buy a new car? Start setting aside money for a down payment. Ready to take that trip of a lifetime? Figure out how much it would cost and make saving a priority. Online tools like Mint are especially handy here, since you can use them to set goals and track your progress.
By now, you may have realized that your regular spending doesn’t leave you with enough cash left over for those goals you outlined in the last step. Spending less is the easiest, quickest way to create breathing room in your budget so you can set aside money to achieve your bigger financial dreams.
Eliminating one meal out a week could save you hundreds of dollars over the course of a year, for example. At $12 per person for the average inexpensive restaurant meal, according to Numbeo, you’ll save $624 by cooking one meal a week at home rather than succumbing to the convenience of Seamless.
Eating out less isn’t the only way to save. Cutting recurring subscriptions you don’t use, watching your spending at the grocery store, and looking for free activities are other ways to gradually trim your budget and boost your savings. Here are 10 other unnecessary purchases that might be eating away at your budget. Eliminate just a couple of them and you’ll find yourself slightly richer at the end of every month.
Reducing spending is great, but there’s a limit to how much you’re willing and able to cut from your monthly budget. When you hit that point, it’s time to look for ways to boost your income.
If you have a special skill you’d like to share with others, create an online course on a website like Udemy. The passive income that comes from this kind of project can significantly reduce your financial stress. This guy says he earned more than $5,000 over five months from his Udemy course.
Most of us have too much clutter in our lives. You can turn your crowded closet or disorganized garage into a source of cash by selling things on eBay, Craigslist, or even at a garage sale. Even stuff that looks like trash to you can bring serious money.
“Believe it or not, there’s a huge marketplace for broken electronics for spare parts,” ebay expert Jordan Malik told Time magazine.
Last, check up on your budget at least once every 30 days so that you can be sure you’re on track. Dedicating just an hour or two every month to managing your budget means that you’ll always be in control of your finances, rather then letting them control you.
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