Start by adding up your expenses
If you haven’t lived on your own before, you might not have a good idea of how much you need to set aside for essentials each month. Start by adding up the big expenses like rent, insurance, car payment, phone plan, gas and groceries. Then factor in the smaller recurring costs like subscriptions and memberships that are easy to forget.
Track your spending
If you only work one job and have consistent paychecks coming in, it’s easy to know how much money you have to work with each month. But it can be harder to nail down exactly where your money goes. Take a month to track your spending and see what you spend. You can log purchases in an app, connect to a service that tracks it for you or use built-in budget tools in your online banking. From there, it will be a whole lot easier to know where you tend to overspend, and you can plan accordingly.
Don’t forget about savings
When you’re planning your budget, think about savings first. It’s a good idea to work out what percentage of your income you want to save each month. Then take that out of your checking account and deposit it in your savings account straight away when your paycheck clears. Paying yourself first can help you stick to your budget since you’re less likely to be tempted to spend money just because it’s in your account.
Try the 50/30/20 rule
If you’re not sure where to start when you’re setting up your first budget, give the 50/30/20 rule a shot. This budgeting strategy has you put 50% of your income toward needs, 30% toward wants, and 20% toward savings. It’s not always possible to stick to this ratio, but if you can work your budget to get as close to these percentages as you can, you’ll be in good savings shape.
Get creative to save money
Save money by cooking, take advantage of student discounts if you’re still in school, try alternatives to driving, or see if you can refinance your auto loan for a lower interest rate. Instead of clipping physical coupons, coupon apps take savings digital. And responsible spending with a rewards card that you pay off every month can lead to free travel, cash back, or gift cards, depending on how you use it. Sometimes it just takes a little creativity to find new ways to save.
Spend on what’s important to you
When you’re living on your own, you have the ultimate freedom to choose what you spend any extra money you have every month. If you want to eat beans and rice for most meals in order to save up for a new mountain bike, you can. You set your priorities, so take the time to think about where you want your money to take you. Then make a plan to achieve your goals.
When you’re ready to take your financial knowledge to the next level, sign up for RMCU’s free online Mastermind course. Learn the ins and outs of budgets, savings, and all the personal finance you wish you’d learned in school.
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