Hey fellow millennials! Even though we are the most creative and innovative generation of this era, we’re also broke and not always the best at making educated financial decisions! Between student loan debt, living off lower wages than the generations before us and the constant pressure to spend money on awesome experiences, we’re at quite the financial disadvantage! I tried to do things as fiscally smart on my end as possible. I attended community college before transferring to an in-state school, I worked part-time for several years before landing a full-time job in my industry, and I lived with my mom the entire time. Even though I didn’t pay rent (which don’t get me wrong, helped out A TON), I still had monthly bills and graduated with some student loan debt from SDSU. Just paying those monthly bills caused me to have a budget from the start, but now I’m starting to look into moving out and renting. Even though I’ve only been heavily researching for about two months, I’m starting to realize that this is not going to be easy! These are a few of the things that I need to keep in mind when creating this new extremely thorough budget!
Account for Any Bills/Future Bills You Will Have
This in my opinion is step number one. Take a look at the bills you currently have and write them all down, along with the monthly average you spend on said bills. Then, after some thorough research of course, write down all the other foreseen future monthly costs that you will have. So in my case, I already pay monthly for my gas, car insurance, cell phone service, gym membership, most of my food and the fees associated with my blog. At the moment I’m lucky enough to not worry about rent, utilities and part of my food intake due to living with my mom. These are all things that will go away the second I decide to move out, which is completely understandable! So what I decided to do is research what type of rent I’m looking at (if I rent with one other person in San Diego) and calculate average utilities for a two-person household. I plan on eating less takeout and doing more grocery shopping when I make this transition, so I try to factor that into my calculations as well.
Give Yourself Limits on Different Areas of Your Budget
Try to find your most recent pay stub, whether it’s a hard copy or electronic, and divide it into percentages of what you should be spending on each aspect. There are many great online resources/worksheets that can help you do this, which can be found via a quick Google search. Unfortunately, not all of your finances will be this cut and dry. For example, things such as student loans might need to be factored in. Now I live in California, which is one of the most expensive states to live in the USA. There’s a general rule-of-thumb that says you should never spend more than 30% of your monthly income on rent itself. I agree with this rule, but sometimes staying in that percentage isn’t completely feasible (ESPECIALLY in Southern California). My advice would be to stick to that range as closely as possible without overly sacrificing safety and quality.
Find Areas Where You Can Cut Back
Do you really need to be a Snack Crate member or do you really need that expensive spin class membership? There are certain things that you may deem important to you, such as me paying extra for guacamole at Chipotle, but there are other things that really aren’t necessary. It’s up to you to weigh out what holds a bigger priority in your life, and to make those tough decisions before it’s too late. Some people are willing to keep the spin classes in sacrifice of an apartment with a dishwasher. I am not one of those people. Now with the Internet and smart phones, you might be able to cut traditional expenses from your life such as cable or a landline. These are definitely things to keep in mind!
Make Tough Decisions on Short-Term Costs vs. Long-Term Costs
Some things might be more expensive up front, but will cost you an arm and a leg in the long run! The best example I can give personally is my cell phone bill. I go through Virgin Mobile as my cell phone service provider. There are pros and cons with going through Virgin, but I’m pretty happy overall. The downside to using Virgin is that you have to purchase your cell phone through them at close to retail price. They do carry the latest iPhone, but you might be paying a lot for it. The upside? My bill is only $35 a month, which is UNHEARD OF nowadays. Yes, you might get a free phone with Sprint or AT & T, but you’ll be paying for it within the two years of that merciless contract you signed up for. With Virgin, I can back out or change phones at any time. I can see where large families benefit more from the bigger guys, but for individuals I think Virgin Mobile is a great way to go. Long story short, by paying more up front you may save a lot more money overall.
Overestimate Your Expenses Rather Than Underestimating
Last but not least, this is a rule that I basically live by. It’s extremely important to overestimate and account for almost everything rather than not accounting for enough. You’re not going to be able to predict every emergency or afford everything that life throws your way, but you can try your best. What’s nice about doing this is you end up with a surplus of funds at the end of each month! These funds can go towards savings, pampering yourself, or possibly investing in some future goal. This is what will set you apart from the rest of us millennials, and you’ll be extremely grateful for that.
Don’t get me wrong, it’s impossible to budget and plan for all of life’s expenses! Despite this, having a budget will help you understand what’s realistic for you to live off of and when you’re stretching yourself too thin. I hope these tips help!
Infographic of the Week:
Question of the Week:
What’s a monthly expense that you don’t mind paying more for?