This post sums up four things you should be doing with your budget in a way that is simple and easy to understand!
Money can be a touchy subject.
I was raised by wonderful parents who stressed the importance of working hard and saving up for what I wanted. At age 12, that looked like a green Razor scooter.
Did anyone else have one of those shin-killers?
It was the very first thing I saved up for with my own money.
I remember being so proud when my parents took me to Toys-R-Us to pick it out when I’d finally saved enough. (P.S., THEY’RE $25 NOW. Totally paid $60 when they first came out #bitter)
Now, the picture of what we save our money for looks a little different. A house, travel, 401K’s…definitely not as exciting as a green scooter.
People in their 20’s are in all kinds of stages of life. Some are starting a family, others are still in school, some are trying to get out from under mountains of debt. This post is meant to simplify the big picture things that you should be saving for (or planning to!). Of course, it all depends on your own goals, priorities and interests!
If you’re just starting out with creating a budget, check out this simple guide on how to make a budget to help you get started.
This post on how to manage money as a couple is also one of the most popular ones on the blog! Here are the four things you should be doing with your budget as a young adult.
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1. Pay Off Debt
This is one of those things that had to be said first. The quicker you pay off your debt, the less you pay out over time in interest. If that means eating out less, minimizing your Starbucks runs, and pinching pennies now, it’s worth it.
The best thing to do is set up automatic payments so that you don’t even have to think about it.
On time payments will improve your credit score, too!
ACTION STEP: Set up automatic payments for your bills.
2. Save For A Rainy Day
I learned the importance of this one in 2016, when I was unemployed and my husband was laid off unexpectedly. Suddenly we were without income, but we had enough savings to keep us afloat until we were able to get jobs (you can read about how we held onto our faith and made it through in this post.)
A good rule of thumb is to save six months worth of expenses in case of an emergency. Tally up your necessary expenses (bills, rent, food, etc.) and multiply that by six. Again, the smart thing to do is to set this money to be deposited into a savings account automatically each month. Even if you can only put away a little bit each month, do it.
ACTION STEP: Set up automatic deposits into your savings at the beginning of each month. Don’t wait until the end to “see what’s left”
3. Save For What’s Important To You
Between paying off debt, saving for an emergency fund and other un-fun adult things, life can get pretty serious. Each month, we put away money in a fund specifically for travel. Yes, that money could go towards more practical things like 401K’s or saving for a house, but you have to enjoy life, too. Travel is something that we prioritize because we enjoy it and we know that dynamics will change big time when we have a family someday.
Whether it’s art classes, travel, or language lessons, save money for what makes you happy. I understand that not everybody can do this, but it’s important not to get so caught up in planning for “someday” that you don’t enjoy today.
We have this quote framed on our wall as a reminder: “Never get so busy making a living that you forget to make a life.”
ACTION STEP: If your budget allows, set up a separate savings account for something that’s important to you.
This is one thing that may not be at the top of the list as far as importance, but as soon as you are able to invest financially, do it! Even if it’s only a little at a time. If your company has a 401K program, be sure you’re contributing with each paycheck. If your company matches a certain minimum, take advantage of that, too. If your company does not offer a 401K program, you can open up what’s called a Roth IRA account.
I’ll be real with y’all: I read the book Investing For Dummies to understand all the complicated lingo like stocks, mutual funds, IRAs, compound interest, etc. There are different types of investments you can make depending on how risky you want to be and how long you want to invest. Educate yourself and jump in. This edition is made specifically for those in their 20s and 30s.
Here’s an example from Forbes on the difference in investing now vs. later:
Let’s look at what happens when you invest $10.00 per week at 8% beginning at age 30. At age 65 your initial investment of $18,200 will have grown to $99,402. That’s $81,202 in earnings. Now, let’s look at what your investment would be if you started 10 years earlier at age 20. Your initial investment of $23,400 would have grown to $228,563 at age 65 — $129,161 more in earnings.
Do it. Do it now.
ACTION STEP: Be sure you’re contributing to your 401K and maximizing benefits. If your company doesn’t have one, open up a Roth IRA account and set up monthly deposits.
No matter what stage of life you’re in, my hope is that this post educates you on what you should be saving and planning for financially. Take the time to do some more research on your own and figure out what kind of budget and savings plan is best for you and your family.
MORE BUDGETING POSTS:
A Simple Guide on How To Make A Budget – The perfect place to start if you’re making a budget for the first time!
How To Manage Money as a Couple (Without Killing Each Other) – Great to read if you’re just starting out sharing your budgeting with your significant other.
If you have any thoughts on what you’re saving for or working towards as a young adult, I’d love to hear them!
Thanks so much for stopping by!