If the only exercise you’ve done this month is run out of money, then you need Personal Budgeting 101!
Growing your money while you’re young and implementing healthy financial habits is one of the wisest things you can do in your teens. As you get older and the responsibilities start to pile up, you have to make hard decisions, like whether or not you can afford to buy three new dresses this week, choosing long-term pay off over immediate satisfaction. You have to learn how to organise your bills and budget your money to maximise your income!
To start out, try giving this Financially Fit Quiz on Sort Your Money Out to put a number to your cash condition.
Understand your income
Seeing the moolah rolling in is one of the best feelings in your teen life, but without caution money can become as easy to spend as it is to make. When you get paid, you’ll get a pay slip, which tells you your gross and net income. Gross income is not as sticky as it sounds, it just means the total pay you’re receiving from your employer, whereas your net income is how much you make after your tax has been taken out. You’re likely to not pay too much tax just yet – the more money you make, the more tax you’ll pay.
Plan for expenses
Now comes the important part that’s easy to skip – making a budget. Make a list of all the bills and usual expenses you accrue in a month. This could be your phone bill, the cost of your monthly hair cut or Go Card top ups. These are the non-negotiables, the things you HAVE to spend money on. Some of the expenses will differ over time, and that’s okay. This is a general guide so you know how much money to set aside for necessities.
We found some great budget templates here.
Less is more
It’s time to start spending wisely. From Instagram to Facebook, and targeted YouTube ads in between, it feels like we’re being berated on the daily to buy, buy, buy! While spending your own money on things you’re really craving is a nice feeling, it can also leave your finances looking like a horror film if you’re not too careful.
Never spend more money than what you earn. Credit cards and AfterPay are not necessary and can be dangerous – if you really want something, take the time to save up for it.
Divide and conquer
Not sure how much you should be setting aside for your future self? We recommend the 50/20/30 split – contribute 50% of your income to fixed expenses, 20% to savings and 30% to personal treats and leisure activities. Sticking to these figures takes the guessing out of stashing your savings.
While it might seem like budgeting is just making hard decisions, the habits you learn now will make it a million times easier to save later in life, and saving is a fundamental part of adulting – at least until money grows on trees!