Budgeting is essential to being smart with your money and will help you not spend money you don’t have. Determine your set income if you have a job or a monthly allowance from your parents. If you don’t have a monthly regular cash income flow, calculate how much money you currently have. Now set up a budget plan.

50% of your income should go towards your needs which should include groceries, housing, insurance and just basic utilities. 30% of your income can be budgeted for wants. These wants can include dining out, gifts, entertainment and travel. Lastly plan 20% of your income to go towards savings and debt repayment. This money can be put aside for the future and be used to pay off debts. 

If you’re still a high school student living with your family you obviously don’t need to plan for rent, utilities and groceries unless you pitch in for those things. You may help out with costly car insurance. If you do, please write that down and budget for more savings if you have an income. If your only income is allowance and/or occasional monetary gifts for special events like birthdays, your wants will have to be limited so you can still plan for 20% of savings each month. Even if you don’t have an exact wish to save for, continue saving because you will eventually need it once a wish materializes and you need to buy a car or pitch in for college.

Needs versus Wants. 

What truly are Needs? Food is a need. Shelter is a need. Clothing is a need. Of course within those three categories you still have to wonder how much you really need to spend on food to stay nourished and healthy. One shouldn’t live on Cup O Noodles alone and yet, probably don’t expect to cook Filet Mignon every night if you’re just starting out with a new job and a new apartment. How basic or fancy does your apartment have to be to stay within your affordable range of rent? And do you truly need that extra pair of shoes since you already have enough shoes? Or maybe you need to invest in a suit for your new job which would most likely be a need in that case. 

Ask yourself with every purchase if this item would constitute a want or a need? Do you really need the fancy new phone or the more expensive gym membership? Maybe the old phone still works and another gym nearby is cheaper, albeit not as well equipped. Is this purchase really something I need for school? Can I buy a cheaper version of this item? Can I wait to make this purchase?” These questions will better help you distinguish whether to purchase that item or not.

Try to set up a monthly record of the money you spend and then the progress you make. Writing it down whether it’s on a spreadsheet or piece of paper will allow you to physically see where your money is going. To make this step easier, you can also get a budgeting app. Even if you generally know what you are spending your money on, that does not mean you are in control of it. This is especially true in the case of credit cards. 

Value is very similar to needs and wants because in order to determine the value of something, ask yourself, do I really need this? Do I need those new pair of pants? Do I, instead, need money to pay gas for my car? The value of something is based on the maximum efficiency and effectiveness of the purchase.

Figure out how much money you make each month (from a job or allowance)

This should be easy if you make the same amount of money each month. However if you don’t, you should average it out. For example, if you make $400 each month for half of the year and $300 the other half, your average would be $350. 

If you pay any recurring bills every month such as rent, utilities like gas, electricity or water, insurances like car insurance, transportation, memberships, cell phone or wi-fi bills, you should write those down first. If you don’t pay rent yet, but you pay a certain amount of dog or cat food every month, definitely write those expenses down as a recurring monthly expense. It's important to know what your fixed and variable costs are. Your Fixed costs are going to be bills like rent every month or mortgage and they mostly stay the same every month. Things like groceries and entertainment are called variable and they can change from month to month. 

Average out costs that can fluctuate, such as gas for your car and food, and add those to your budget. These are expenses that might differ a bit every month, but cannot be avoided and should therefore be second on your list.

Thirdly, write down the money you spend when going out with friends, buying clothes, going out to eat and trips to Starbucks or other coffee shops. Don’t worry if your numbers aren’t exact, you’re just trying to get a budget started. 

Next, write down how much you want to save each month. This is the amount of 

money you will put into your savings account. This will be assigned for either emergency fund money or a certain goal you’re saving for. Plan for about 20% of your income.

Do the Math 

Add up all these expenses, including savings money, and bills and subtract this number from income you wrote down in the beginning. If your first budget drafts reveal higher expenses than your income you will want to cut back on expenses such as movies, clothing, or anything not necessary. By doing this you will also learn how much money you can afford to be spending each month. 

After creating a budget, you need to give your expectations of income vs. expenses a reality check. It’s time to start the next month by writing down every single expense, no matter if it’s a pack of gum, a coffee or a dinner with friends. This will require some dedication and patience but there’s no other way to document your expenses correctly. Even if you paid for everything with your debit card and it’d be reflected on your checking account, you would still have to add them all up at the end of the month. You will also keep yourself in check more by writing everything down because it’ll remind you if the purchase you’re about to make is a true need or want. You might be surprised in the end how much more you are spending on impulse purchases or gifts for others or coffee drinks. If you do, you will have to ask yourself what you can cut down on. If you don’t want to spend less, you need to find another way to earn more money. Can you get an extra shift at work? Will it be worth it for you to work more so you can see the movie on the big screen? Do you really need to buy another nail polish while five others are in your bathroom drawer?

Some finance books give the tip of creating a cash envelope system to better control your spending as it is always more real to spend actual cash than using a debit or credit card. 

You create and label one envelope for gas or transportation money, one for lunch or snack money if needed, one for leisure spending - expenses such as going out, drinks, manicures, apps, music, clothes, etc. Based on your previous budget plan, you have accounted for a certain amount for each of those things, let’s say $50 for gas and $150 for leisure expenses. Put in the cash for that, use it for those expenses only, and put the receipt in the envelope or jot down the expense right away. 

See how long these envelopes last you. The envelope will keep you more in check of your expenses and will make you live within your means. The only drawback is that you have to carry the envelopes with you and there is the potential of loss. 

If you just keep cash in your wallet, you don’t get to see the visual picture of expenses of needs versus wants. You will probably have to spend gas money, but not necessarily the movie ticket. That is the big advantage of the envelope system instead of just having cash in your pocket. 

In order to get a good grip on your budget, you will need to track everything for at least three months before you ease up and do it every couple of months in order to stay on your path to good personal finance and savings.

There are many apps on the market to help you budget. Mint is one that is highly recommended for adults but can also work for teenagers and it’s free. It’s all up to personal preference what apps you might like to use better. Another account great for budgeting is called Acorns. This budgeting app will help you decide each month which percentage of your income you put towards saving or other goals. This app links your bank account and credit cards, rounds up your daily purchases and automatically invests the change.

Website tips:

O'Shea, Bev, et al. “Budgeting 101: How to Create a Budget.” NerdWallet, 16 Jan. 2020, www.nerdwallet.com/blog/finance/how-to-build-a-budget/.

 Personal Finance book

Murray, Christopher. “How To Make A Budget: Step-By-Step Guide To Managing Your Money.” Money Under 30, www.moneyunder30.com/how-to-make-a-budget.

“Teen Budget Worksheet Printable.” FamilyEducation, 24 July 2008, www.familyeducation.com/printables/parenting-tools-printables/teen-budget-worksheet.

Williams, Geoff. “6 Apps Teens Can Use To Manage Money.” HuffPost, HuffPost, 28 Mar. 2019, www.huffpost.com/entry/money-apps-for-teens-and-parents_l_5c979128e4b01ebeef108c34.

“Budget Spreadsheet Activity - Mr. Hicks.” Google Sites, sites.google.com/a/egsd.org/hicks/announcements/budgetspreadsheetactivity.

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