Teen Talk: Creating a Monthly Budget You’ll Use

Teen Talk: Creating a Monthly Budget You’ll Use

If you have ever wanted to buy yourself something but didn’t have the money, or you had to pass on a fun activity with your friends because you couldn’t afford it, this article is for you! We’re talking about budgeting, knowing how much money you have and planning how you are going to spend or save it.

Budgeting is important because it puts you in control of your money and helps you build good money management habits for life. When you sit down and map out a concrete monthly budget, you empower yourself to achieve your financial goals and experience true peace of mind.

Fortunately, creating a budget can be relatively easy — and, if you’re committed to making it work, relatively easy to stick with. Here’s the process, broken down into seven easy steps:

Step 1: Decide how you’ll keep track of your budget.

Your budget should not live only in your head. It needs to be a working tool you can access, review and adjust whenever you need or want to. You can find budgeting tools and apps online, build your own spreadsheet in Excel, or keep a physical notebook with all your notes and calculations. Choose the tool you’re most comfortable using and move on to Step 2!

Step 2: Know what you’re working with.

Having a clear understanding of your income — how much money you have coming in each month — is essential to creating a realistic budget. This may include money from a job, a side hustle, a monthly allowance, financial aid, scholarships (do not include tuition-direct payments), etc. Add these together to calculate how much you are receiving each month.

If you would like to increase your income and don’t have a job yet, you may want to consider whether a part-time job is a good option for you. A regular paycheck may make it easier for you to pay for the things you need and want, as well as to build your savings. Before you commit to a job, though, make sure you’ll still have plenty of time for the homework and extracurricular activities that are important to your education and well-being. (Here are some tips for finding a job and acing the interview.)

Step 3: Take stock of your fixed costs.

Next, list your fixed monthly costs — your phone bill, tuition, rent, utilities, subscription services and any other obligations you have committed to paying each month. Be precise, making sure you have included every item. You don’t want to realize halfway through the month you’ve forgotten something.

Tip: For your regular monthly bills, consider setting up convenient automatic payments from your checking account so you never miss a due date. Dollar Bank’s Online Banking and Mobile App enable you to schedule bill payments, set up regular transfers to your savings account, check your account balances and activity, and more.

Step 4: Estimate the rest of your spending.

Knowing you have enough money to cover your monthly necessities is great, but we all know that’s not where spending stops. Look over your past few months’ bank statements and credit card bills to get an idea of how much you’re spending in addition to your monthly fixed costs. For example, how much are you spending on groceries, gas, school supplies, clothes, haircuts and food deliveries? These expenses are likely to change from month to month, but estimate them as best you can so you have a figure to work with.

Step 5: Set savings goals.

Savings should be part of your budget plan, not an afterthought. When you get into the habit of saving regularly, you build financial stability and help ensure you have cash when unexpected costs or opportunities arise. To get an idea of how much to save each month, consider using the 50/30/20 rule: Plan to spend 50% of your income on things you need, 30% on things you want, and 20% on repaying debts and building your savings.

Tip: Even if you’re only able to save a small amount each month at first, your savings will build! As your income grows, you can save more each month to achieve your savings goals faster. Depositing your money in a savings account helps it grow, too, as it earns interest over time.

Step 6: Do the math.

Using an online calculator, pencil and paper, or the spreadsheet program or budgeting app you’ve chosen, subtract your fixed monthly costs (Step 3) from your monthly income (Step 2). The number you’re left with is the amount you have available for your estimated spending (Step 4) and savings (Step 5). If that amount covers everything with money to spare, decide where you can best apply those additional funds. If it doesn’t cover everything, then go back over each item in Steps 3-5 to see where you can cut back to make your budget work.

Step 7: Schedule regular check-ins.

Check in on your budget weekly to make sure you stay on track with your spending and saving. (Set an alarm or make a note in your calendar so you get into the habit.) Are you meeting all your obligations? Do you see areas where you could cut back on spending to save more? Make adjustments that make your budget work for you.

These scheduled check-ins are also a great time to stop and think about your financial goals for the future. Do you have new short-term goals for your money? What about long-term goals? Is there a big purchase you want to save up for? When you stop to really think about why you’re budgeting in the first place, you may find it easier to keep going and stick to your budget.

Remember: Your budget doesn’t have to be set in stone. Any time your situation changes, whether you’re getting a new job, taking on a new car payment or making a major purchase, you can rework your budget. As long as you’re being mindful about your money, you’re on the right path!

This article is for general information purposes only and is not intended to provide legal, tax, accounting or financial advice. Any reliance on the information herein is solely and exclusively at your own risk and you are urged to do your own independent research. To the extent information herein references an outside resource or Internet site, Dollar Bank is not responsible for information, products or services obtained from outside sources and Dollar Bank will not be liable for any damages that may result from your access to outside resources. As always, please consult your own counsel, accountant, or other advisor regarding your specific situation.