How to Budget for Teens | 5 Tips
You may not have a full-time job or any liabilities as a teenager… just yet. Basic budgeting skills, on the other hand, can help you organize your spending and set you up for long-term financial success.
Some fundamental life skills are not always taught in schools, such as how to budget. Budgeting is a fundamental skill that is useful every day to enhance your financial situation. Here are some guidelines to help you get started with setting a budget as a teenager.
How to Set Up a Budget
- Determine Your Income
Figuring out how much money comes in, or understanding how much money you make, is the first step in budgeting. Whether you earn money from a part-time job or receive a monthly allowance for household chores, you should add up how much money you earn each month.
Whatever amount you come up with, learn to direct your spending and saving. If the sum fluctuates from month to month, stick to the lower figure to be on the safe side. Add together all of your monthly earnings to get your total monthly income, after taxes.
2. Categorize Savings and Required Spending
Keep two key categories in mind when developing your categories: saving and spending. List the various expenses that you’ll be allocating your funds to under these two headings.
Required expenses are costs that must be paid on a regular basis—they’re the must-haves. This could be a monthly mobile phone cost for a middle or high school student, lunch money, or gas and auto insurance if you drive. To determine a baseline set of expenses, add up these expenses over the course of a month.
Gym memberships, subscription services, extra food/treats, clothing and accessories, grooming and beauty services, entertainment and activities are all examples of additional expenses. With spending it’s really important to establish your needs and wants. Budget should always be prioritized for things you need as a teen.
3. Select a Budgeting Strategy
After you’ve made a list of all of your categories, you’ll need to figure out how much money to set aside for each one. This can be accomplished using a variety of budgeting techniques. Learn about a few different tactics below and pick the one that best suits your needs.
a) “Pay Yourself First” Budgeting Method
This strategy entails putting a set amount or percentage of your earnings into savings right away. You can spend whatever money is left over in whatever way you like.
b) Zero Based Budgeting
Do you want to keep track of every dollar in your budget? This strategy is based on the premise that subtracting your expenses from your revenue yields a zero outcome. Estimate the cost of each budget category and, using those estimates as a guide, divide your income until you reach zero. All your funds should be allocated to a category leaving you with 0.
c) 50/30/20 Rule
This rule distributes your money based on the percentages below: 50% for necessary expenses, 30% for miscellaneous expenses, and 20% for savings. These percentages can be adjusted to match your needs, and if you don’t have a lot of bills, you might wish to put more money into savings.
4. First Save, then Spend
Now that you’ve decided on a budgeting strategy, it’s a good idea to put money into savings before you start spending. If you begin spending before saving, you run the risk of blowing your budget one month and having nothing left over to save.
By making saving a priority, you may develop financial discipline and make it simpler to keep to the budget you set up in the first place.
5. Balance the Budget
It is important to note that you should not spend more than you earn. You can try finding strategies to reduce spending or enhance income if you overspend. For instance, you might decide to carpool for a month to save money on gas and put the money toward a concert ticket. Teenagers can supplement their income by working part-time jobs such as mowing a neighbor’s lawn or babysitting.
Consider Having a Budget as a Teen
Having a budget is a good tactic to learn so that you have success as an adult with your personal finances. Learning to budget as a teen will not only set you on the right track but will instill good habits from a young age.
Getting to financial freedom has many components. Earning will always be important, but what you do with those earnings will dictate how much wealth you accumulate, and what your lifestyle looks like. The more money you can budget for investing, the higher the probability that you will have a successful financial future.
Now is the time to learn how to budget, you will be happy you did.
By: Robert Puharich | February 20, 2022 |
