Financial Goals
Making it on your own takes more than determination. It takes a plan. Planning may not sound like much fun, but it’s the only way you’ll have the freedom to really take advantage of a new situation. Even if the idea of making big purchases or living on your own is still years away, you can start preparing for a successful financial future by managing your money NOW.
Plan. Budget. Spend wisely.
Budgets are smart. Why? Because they help you plan and get the things you want — like a new DVD or concert tickets. And there’s a lot to keep track of — probably more than you realize. After high school, you’ll need money for tuition, housing, books, food, travel expenses, credit card payments and other bills, and it can be hard to keep your finances in order.
So, how much money do you need to earn to make it on your own? This step-by-step guide to learning how to budget your finances can help you get started.
Step 1: Discover how much you can spend
First, find out in advance how much money you have to spend and for how long you have to budget it. This might mean budgeting for a month at a time, for a six-month internship or for a four-year trade school. Take the duration of time into account.
Then add up all your money sources. Don’t leave anything out. What you are calculating is your available money after all deductions (such as taxes) have been taken out. If you’re not sure what your income after deductions will be from the place you work, ask for their help.
Now divide by the number of weeks in your budget period. This is the maximum dollar amount you can spend each week on everything. Let’s call this amount your weekly budget.
Step 2: Where does my money go?
A book here. A CD there. A weekend away. Dinner on Thursday. Money has a way of disappearing. To see where it goes, buy a little notebook and for a one-week period, write down everything you spend by item. Everything. Ideally, you should record your spending at the time you spend it. This may seem like a pain, but you need to find out your spending patterns before you set up your budget.
Step 3: Set up your budget
Define your spending categories and set realistic weekly spending targets for each one. Don’t allocate spending $80 to food if you know you really use $100. Try to predict expenses you’ll be having that might not have occurred in Step 2. Create categories that make sense for you. Then add up all the categories that have dollar amounts to calculate your weekly budget.
Here’s an example of basic monthly living expenses in Delaware:
| Apartment | $700 |
| Car payment | $300 |
| Car insurance/maintenance | $200 |
| Phone/gas and electricity | $200 |
| Food | $400 |
| Entertainment | $200 |
| Total | $2,200 |
To get really basic, you could cut out a few things: substitute bus fare for the car & car insurance, entertainment, and half the food, and bring the total monthly expenses closer to $1,060.
Now think about what else you spend money on. What else would you like to spend money on? A new computer? A fancy car? Sports tickets? A vacation? Add these costs in, and don’t forget to consider unexpected costs like parking tickets, medical expenses, gifts, etc.
Step 4: Test your budget
Test your new budget by comparing what you spent in a week (the actual amount you spent for the week) with the category target (the estimated amount you calculated before the week began).
Still have that little notebook? This time give each category its own page. As the week progresses, write down your spending on the corresponding page. At the end of each week, add up each page and compare page totals to the budget you set up in step 3. If you went over target in a particular category, maybe the budget was too low, or maybe you need to reduce your spending.
Step 5: Spend less
If your spending is consistently more than your weekly budget, think about what you can cut out. Here are some ideas for tightening your financial belt. They may make life seem less fun temporarily, but the effects on your bank account will make it worthwhile.
- Food: Cut out frozen foods; cook from scratch; never shop when you’re hungry.
- Fun: Watch TV, rent movies, or play games at home instead of going out; borrow videos and games from your friends.
- Clothes: Avoid the mall and impulse buying!
- Credit cards: As visions of iPods or new shoes dance through your head, resist the urge; avoid carrying your card with you every day. Credit cards can be budget-wreckers because they make purchasing things you want (but can’t afford) too easy!
