How to Make a Budget for Living on Your Own
If you're about to move out of your parents' home to be on your own for the first time, you may be apprehensive as well as excited. Independence is terrific, but it can also be more expensive than you first thought. Learning how to make a budget, however, doesn't have to be an exercise in drudgery. Not only are there online and mobile apps you can use to make keeping up with income and expenses easier, learning how to make a budget helps you have money for the things you enjoy. Here's how to start your new life as an independent adult with fewer money worries.
Common Mistakes of the Newly Independent
Perhaps the biggest mistake young adults make when setting up their own household is learning how to make a budget. The principle is simple: knowing how much income you have each month, and how much you spend. You can keep your budget in a notebook, on a spreadsheet, or in an app, and it is the best thing you can do to prevent a financial catastrophe. Learning how to make a budget is one of the most valuable life skills you can develop.
Another big mistake people make when they first move out of Mom and Dad's is putting off saving. You may wonder what the point of saving is if you only have a few extra dollars left over from each paycheck. However, saving even $5 a week is better than not saving at all. You'll thank yourself for saving when you need a car repair or have an uncovered medical expense.
Preparing for Expenses You Hadn't Considered
When you're learning how to make a budget you have to consider everything. In order for a budget to work, it has to include all the little things you spend money on, like parking fees, drive-thru meals, and extra rental fees when you adopt a pet. If you're not used to cooking for yourself, you'll soon discover that you need a range of products on hand for food preparation. And you'll need cleaning supplies for your apartment or house. Subscriptions, car registration, and entertainment expenses are other costs people often overlook when learning how to make a budget.
Quick and Easy Money-Saving Tips
Learning to cook will do more to save you money than just about anything. Learn five basic meals (say, chicken and vegetables, chili, spaghetti with marinara or meat sauce, tacos, and slow-cooker roast with veggies), and have a microwave for reheating leftovers, and you can cut food expenses drastically. Plus, homemade food is almost always healthier than what you buy prepared.
Get into the habit of turning off lights, appliances, and electronics when you aren't using them, and if you have the option, consider getting a programmable thermostat to keep heating and cooling costs down.
Place an embargo on your credit cards and use them only for emergencies. Using cash or a debit card for day-to-day expenses prevents you from overspending and accruing interest charges.
Consider all your transportation options. Do you really need to drive everywhere, particularly if you have to pay for parking once you get there? Walking or biking when you can is healthier and saves you money. Remember: the cheapest gallon of gas is the one you don't use.
Set up reminders on your phone to alert you when bills are due. Late fees can really add up, and if you consistently pay bills late, your credit history is affected, making it more expensive to borrow money when you want to finance a car, house, or some other major purchase.
You Need a Financial Cushion
You may have heard that you need a financial cushion of three to six months' living expenses set aside and decided that it's impossible, so you're not going to bother. While having that much set aside is ideal, having any money set aside is better than none. There are countless ways to work toward building an emergency savings account, from setting aside your pocket change every day and putting it in the bank at the end of the month to having some of the money from your paycheck automatically put into savings. Start now, even if you only save a few dollars a week, because it adds up over time, and can help you avoid financial hardship later on.
Learning how to make a budget isn't the most exciting thing you'll do when you first move out on your own, but it can make the difference between just getting by and making the most of your money so you can enjoy your independence to the fullest.
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