budget

Building a budget can seem like a daunting task – you’re in your twenties… why does money even matter? But, remember how much trouble credit card debt can get you in? Building a budget can help you stay out of the red and ensure you are on the road to financial freedom!

Building a budget is easy if you follow these simple steps:

1. Define your income

Figure out all the sources of incoming money: pay cheques, allowances, scholarships are all part of your income. Your income is the first line of your budget and it should be after-tax (net) income. You don’t get to keep all your income, due to taxes, so you shouldn’t include it all in your budget.

2. Cover your needs

Your needs are defined as the things you require to survive. Food, clothing, shelter are all things you require to keep yourself afloat. Shopping, movies, and lavish dinners out do not constitute needs.

3. Include savings

This is one of if not the most important steps to building your budget. Savings needs to be part of your budget; it’s imperative. By making monthly contributions, even small ones can make a huge difference down the road.

4. Now for your wants

READ MORE  Tips for traveling solo

After taking into account your needs and including savings in your budget you can allocate the rest of your money to your wants. By taking care of your needs and savings you can spend the rest of your money guilt-free on things you want and enjoy.

5. Make it flexible

Budgets have to be flexible. Depending on your situation your budget can and will change. Having a buffer in your budget allows you to adapt to different situations without going into to debt.

By following these simple steps you will be able to build a budget that covers all your needs, ensuring you are saving for your goals and future and still have fun in your twenties.

Photo credit: Rachael Tulipano