I know I’m not only speaking for myself when I say money is great – when you have it. Being in your early twenties is great until you’re faced with real life. But enough of flaunting the ‘fabulous and broke’ lifestyle; but rather flaunting the ‘financially smart and stable’ lifestyle.
Cash flow is important to be aware of – you must know where your money is going and that more money is not going out than is coming in. As we are finally learning the art of adulting, we have more money coming in but that comes with the other reality of being an adult: bills and necessary expenses. Earning a pay cheque is liberating and necessary and they don’t come easy. You have to put in work to earn. And you don’t want to blindly throw away that hard work.
Most of us in our early twenties are winging it big time when it comes to finances but that shouldn’t be the case. We’ve all faced that moment of severe overwhelming panic, making just enough to cover expenses but never really on top of it all. Rather than panic, take action to craft a smart and realistic budget. Nothing feels more boss than a sense of control over your finances.
In order to control your finances, you should put a budget in place which I’m sure you’ve heard plenty of times before. Creating a budget does not have to be the daunting process most make it out to be. With the proper resources and attitude, it could go quite smoothly. A budget is simply a plan – one to make sure your money is going where you need it instead of trickling away faster than you realize. Face it, we’ve all been there. That stark moment you swipe your card only to realize there are insufficient funds and you’re scratching your head wondering where your money disappeared to. Here are my tips for creating and maintaining a budget that works to avoid the risk of overspending, under saving, and running into debt; the art of differentiating between our needs and wants, and prioritizing where our hard earned money should go.
- Stop using “being young” as an excuse to be financially irresponsible.
Being young has great benefits – the lack of family responsibilities and such may make it feel like that pay cheque is all ours so why not enjoy life and party! There’s nothing wrong with having a good time, now is the perfect time to do so, but don’t overdo it. You still have financial responsibilities: student loan payments, credit card payments, phone bills, transportation, food, rent (if you’ve left the nest), and so on.
If you’ve gone over your entertainment budget, tough luck. Stay at home or find something free to do in the city. Good friends will understand if you cannot hit the clubs because you don’t have the money to do so.
- Live below your means, rather than at or beyond it.
Finish moaning and groaning about all the sacrifices you’re about to make and think of it in a different light: you’re about to become a boss at saving money. It’s all about attitude when it comes to sticking to a budget so know what the bare minimum you can live off monthly is and go from there. Stop trying to live a lifestyle above your means – you may attract a certain crowd with it but it is doing you no good.
- Prioritize, prioritize, prioritize!
Cover essentials first. For example, sort through debt payments before entertainment. Seems like an obvious thing to say, but it’s incredible how many people oversee this basic logic.
- Create a visual and keep records.
There are tons of apps and online resources to do so, but excel works just the same. Have a visual representation is a great help and as a creative, I make my spreadsheets colour codes and visually appealing and it seems to work better for me because of it.
- Learn the power of cash and organization.
Divvy things up in envelopes. Hear me out on this technique: Budgeting numbers on paper (see #4) is one thing, but it’s a whole other thing to have envelopes with designated physical amounts of cash set aside, the maximum amount you expect you’ll need, within the budget. Whatever is left over in the envelopes at the end of the month could go nicely into a savings or emergency fund envelope. Remember, it’s very easy to overspend when swiping debit or credit cards so avoid this.
- Emergency Fund
I notice whenever I bring this up with others my age, they brush this off. Maybe because they think ‘emergency’ only means dropping dead. You may get laid off or stumble upon unexpected costs like dental. I remember my summer visit to the dentist and being told I had a to get my wisdom teeth out, a root canal, and a replacement of 3 childhood fillings. Needless to say, that’s a large chunk of money that I didn’t have in my back pocket. Be prepared for stuff like that.
Different from your emergency fund, set aside a savings account to put money in for specific things in the future – a major purchase, a home or new car, a vacation, etc. This way, you saved money (hopefully earned a few bucks from positive interest in the savings account) and won’t be left penniless because of it.
- Know when you’re about to splurge largely and adjust your lifestyle budget accordingly in advance.
The holidays, important birthdays, big events, trips, new appliances – these have to be fit in so plan accordingly.
- Know what to splurge and skimp on.
Personally, I’d splurge on the foundation but skimp on the lipstick. Pick your battles.
- Take advantage of being a student.
Life is rough, but there are discounts. Be aware of them and use them while you can!
- Being social is expensive.
The brunches, dinners, movies, drinks, museums – all of it. It costs and it adds up quickly without you noticing. Try having more nights in than out or find budget-friendly things to do in your city.
- Make a list before you go shopping and stick to it.
This will save you the time of strolling through every aisle and the money of throwing a bunch of things in your cart you do not need, getting home to realize you forgot something and going back to repeat the chaos. Make shopping quick and easy. Lists are your friend.
- Excess clothes, shoes, and purses – just stop!
Put an end to constant shopping sprees and ridiculous designer prices. You could easily find the same thing hundreds of dollars cheaper without the hot shot tag on it, often not even visible.
- Make your own coffee and lunches.
I’m so guilty with this; I almost hesitated to include this from the fear of sounding hypocritical. It’s makes a major difference but personally, I find it difficult to maintain. But think of it this way: 1 coffee a day at $1.80 each equals $54 by the end of the month. Add that to a daily lunch of $9.00 you’re looking at $324 gone (calculated at 30 days). Seems small by day but adds up quickly.
- Prep meals and snacks.
Similar to the previous point, when you don’t have snacks on hand and hunger hits, you end up paying a ridiculous price for a small cup of yogourt or bag of chips (or as I see it, a bag of air). Buy things in bulk at Costco or Bulk Barn and you’ll see how much this saves you. Keep these extra snacks everywhere – your desk at work or in your bag. If you really want to step up in life, pack healthier snacks like almonds or berries.
- Coupon your way through life.
There’s absolutely no shame in this. Groupon is awesome! Scout for deals all the time. Finding a good bargain is a great skill to acquire – it allows you to enjoy the finer things in life within your budget.
- Use hand me downs and hand them down yourself.
When clothes no longer fit, pass them to little siblings or cousins. There’s nothing wrong with reusing clothes. Same goes with textbooks (biggest scam in the university of scams) and other things that could be reused. My parents saved thousands of dollars because of hand me downs for me from my cousins, and for my siblings from me.
- Don’t take extra money with you.
Sounds weird to many but I began this new method to my madness and it’s been working like a charm. Whenever I leave the house, I never take more than I plan to spend. I take out the necessary cash and don’t exceed that (see #5). Of course, I have my card with me for emergencies or exceptions, but just the notion of a physical amount of cash that’s visible to you is a great reminder limiting you from going crazy. Out for a night at the bar and see you only have a $20 bill left? Account that for whether you need money for a cab home before you plan on buying another drink with it.
- The public library is your friend, use it.
Reading is my life force so the library has always been my safe haven. Buying a new book is one of my favourite feelings but on a budget, this could be easily skimped on with the use of your local library. You could even borrow magazines, CD’s, and movies here.
- Use public transit or your legs.
Trust me; I know better than anyone the frustration of being a transit commuter. It may not be the most convenient but the amount of money I’m saving by this is enormous. Let’s put it this way: I live in Toronto where a monthly metro pass costs $141.50 which is high in my opinion but it’s nothing compared to the costs I would have as a driver. There’s the cost of the car itself, insurance, gas, parking, oil changes or other repairs. I’m saving hundreds of dollars a month by using public transit or walking anywhere within reasonable distance. Plus, think of the obvious benefit of exercise as a walker.
- Wiggle and adjust.
Everyone has a different life and different income and expenses – you yourself must determine how each method works for you and where you’ll be wiggling and adjusting. This is not only in terms of comparison to others but in comparison to yourself; as your income and expenses change through time, you must change with it.