Learning some self-control lessons perhaps are one of the most important budgeting tips for young adults. self-discipline will help young adults take charge of their own financial future. In addition to being self-disciplined, spending less than you earn will help you stay out of debt, and save more for emergencies. Other tips and ideas on saving money through the creation of a practical budget are;
#1: Create your monthly budget
Perhaps the best way to work out a practical budget is to calculate how much income you earn regularly, and through your side business (passive income from freelance writing online, dog walking, or babysitting, for instance).
Write down your total income, and then write down your monthly spending on accommodation, groceries, eating out, entertainment, gas, insurance, student loans and other monthly expenditure. Experts on finance suggest that you should create a budget on a “50-30-10-10 rule”. Experts say you should spend no more than 50% of your income on fixed monthly spending, 30% should go to the fun, shopping, and other entertainment stuff, 10% should go towards loan repayment and the remaining 10% should be saved towards retirement and investment.
As a young adult with lesser fixed monthly spending, you may want to allocate more from your fixed spending budget, towards investment and saving. Remember, the earlier you also repay your debts such as student loans, the more financial freedom you will have.
#2: Always review your monthly budget
Now that you have a practical budget, you need to perform a periodic review, to see where you can cut back on your costs. For instance, it makes a lot of sense to stay on the family insurance plan if you are not older than 26.
Most entry-level jobs may not provide the best insurance cover for you, but you eliminate insurance premium from your monthly bills. Learn to separate your needs from your wants. Needs are very important, wants are unnecessary. For instance, you may want to reduce spending on shopping. One good idea is to eliminate the need to but newly released gadgets on yearly basis.
#3: Avoid swiping credit cards when you can pay cash
It is quite easy to swipe credit cards for payment rather than cash payments because we don’t like money leaving out hands. When you use credit cards to make payments, it becomes difficult to track your budget spending and you will end up spending more. When you reduce your credit card usage, you will pay off your credit card bills much faster.
#4: Create a passive income opportunity
If you are struggling to keep up with your finance, then you should consider starting a side-business or passive income opportunity. Most finance experts believe that a 9-to-5 job may not give you that financial freedom you desire, but a side-business can complement your tight budget and give you an extra to save or spend.
There are lots of passive income ideas you can choose from especially online. Make sure you conduct a research on your strength and weaknesses and you will definitely figure out how to make money doing what you enjoy doing.