Perhaps you’re wrapped up in the responsibilities of your first real job and you treat purchases as an afterthought. Although certainly understandable, this isn’t a good idea. Harvard College’s Financial Literacy Guides can help.
The website explores why you need a budget and how to create an effective one. Begin by creating a list of what you spend each month, and then separate it into categories. Necessities—housing, transportation, food, and utilities—come first. After these essentials, take note of your monthly debt payments. Car loans, student loans, and credit card invoices fall into this category.
Finally, you’ll arrive at discretionary spending or, in other words, the fun stuff: what you spend on entertainment, dining out, online shopping, and so on. Once you’ve written down all these expenses, compare them to your income. If you’re spending more than you’re earning, you should make changes.
Being honest about your needs versus your wants can help close the gap. Turning everyday indulgences into an occasional reward will not only make you feel virtuous, it will help you reach your goal of having enough money for the things that are important to you.
To that point, there’s one other category: saving. And the best way to save is to bank a certain amount from each paycheck and act as if you never had it in the first place. Before long, your savings will grow, and you’ll be less tempted to dip into them.
Keeping track of monthly expenses used to be a tedious chore, leaving little wonder why people failed to stay on budget. Today, however, there are apps that do all the heavy lifting for you. Mint.com is a great example. The Mint app puts your entire financial life in one place and notifies you when bills are due, so you’ll always know where you stand.
As your income and goals change, so should your budget. Adjusting your budget to accommodate your needs is a skill that will prove beneficial throughout your career. If you need any assistance in setting up a monthly budget or staying on track financially, we’ll be glad to help.
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