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How do you budget money?
I am a freshman in high school
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4 answers
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Mohit’s Answer
Thrilled to see this inquiry coming from a newcomer!
Budgeting begins by understanding what you possess, which covers your earnings or any money you've set aside. Next, determine your expenditures, such as housing, utilities, and food expenses.
Additionally, it's essential to distinguish between necessities and wants.
Make it a habit to save before spending. To boost your savings, consider setting specific goals.
Budgeting begins by understanding what you possess, which covers your earnings or any money you've set aside. Next, determine your expenditures, such as housing, utilities, and food expenses.
Additionally, it's essential to distinguish between necessities and wants.
Make it a habit to save before spending. To boost your savings, consider setting specific goals.
Updated
Juliana’s Answer
Fantastic question! Begin by examining the money you earn, which is your income. This could come from pocket money, part-time jobs, or even doing chores. Next, consider how you want to allocate that money. Various websites offer different suggestions, but one example could be setting a budgeting rule for yourself, like the 50/30/20 rule. In this rule, 50% of your income goes towards necessities (such as your monthly cell phone bill), 30% towards things you desire (like games and movies), and 20% towards savings or investments.
The main principle of budgeting is to not spend more money than your income allows and to include a portion for saving and investing, rather than just spending it all (living paycheck to paycheck). Initially, it may not seem like you're saving much, but you'll be amazed at how quickly it accumulates. A helpful way to motivate yourself is to set a goal (for example, save $10,000 to buy a car by a certain date), but ensure that it's a realistic goal!
The main principle of budgeting is to not spend more money than your income allows and to include a portion for saving and investing, rather than just spending it all (living paycheck to paycheck). Initially, it may not seem like you're saving much, but you'll be amazed at how quickly it accumulates. A helpful way to motivate yourself is to set a goal (for example, save $10,000 to buy a car by a certain date), but ensure that it's a realistic goal!
Updated
Gulshan’s Answer
Financial Literacy is surprisingly lacking around us, and so it is heartening to see such interest and initiative from a freshman! Congrats! You've crossed the first hurdle to becoming financial independent - by choosing to aim for it.
Since you're a student, I'd start by asking that you consider budgeting for college students as your starting point, since that is quite likely going to be your first experience with independent financing decisions. Good primers are available from Forbes Magazine and MIT Student Services - links below.
Another collaborator mentioned 50/30/20 rule - that is an excellent rule-of-thumb that can help you build much needed guardrails as you make your way towards owning your financial decisions.
All said and done, budgeting is all about ensuring that your expenditures are covered by your income - current and - in some cases - anticipated (future). You're going to have to make discretionary decisions - life will throw curveballs at you all the time. You'll have to figure out how to "balance your budget" to cover unplanned expenses - essentially, meaning how to cover new, unexpected expenses by choosing to cut back on other perhaps committed expenses, so that your overall budget balance (net of income less expenses) is minimally impacted. It won't be possible all the time, but the more you do it, the more you'll realize where do you have wiggle room, and what are your absolute must-haves, the non-negotiables. Things will change in terms of your situation - you'll go to college, you'll pay rent on your own dorm or apartment, buy your first car, you'll have a significant other, perhaps choose to marry and have kids, maybe buy a house, go to grad school, etc. Those are some of the big-ticket items that are often cited as key budget drivers. However, in all this, try and not lose sight of the small things - a drive-thru coffee purchased everyday, over a year can easily add up to an extra $800 ($4x200 days); an extra-day-a-week of eating out for a couple, over a year can mean an extra $2500 ($50x50 days); etc. These small things can make a difference, and the more you plan for them, the less of a surprise they will be.
Ultimately, the aim of budgeting will also be to lead to a safe and secure retirement, when you don't want to have to worry about outliving your financial support system. Compounding is going to be your best friend in getting long-term benefits from budgeting and saving. See link from Investor.gov below for a handy calculator.
As you gain more experience and confidence, you can venture into investing. Budgeting will allow you to make provisions for saving enough to invest. There are enough stories all around about what investing can do for you - so I won't go there for now.
Good Luck.
Budgeting Primer from Forbes - https://www.forbes.com/advisor/education/how-to-budget-in-college/
Budgeting primer from MIT Student Fin. Services - http://sfs.mit.edu/manage-your-money/budgeting/how-to-budget/
50/30/20 rule from Nerdwallet - https://www.nerdwallet.com/article/finance/how-to-budget
Sample Compounding calculator - https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
Since you're a student, I'd start by asking that you consider budgeting for college students as your starting point, since that is quite likely going to be your first experience with independent financing decisions. Good primers are available from Forbes Magazine and MIT Student Services - links below.
Another collaborator mentioned 50/30/20 rule - that is an excellent rule-of-thumb that can help you build much needed guardrails as you make your way towards owning your financial decisions.
All said and done, budgeting is all about ensuring that your expenditures are covered by your income - current and - in some cases - anticipated (future). You're going to have to make discretionary decisions - life will throw curveballs at you all the time. You'll have to figure out how to "balance your budget" to cover unplanned expenses - essentially, meaning how to cover new, unexpected expenses by choosing to cut back on other perhaps committed expenses, so that your overall budget balance (net of income less expenses) is minimally impacted. It won't be possible all the time, but the more you do it, the more you'll realize where do you have wiggle room, and what are your absolute must-haves, the non-negotiables. Things will change in terms of your situation - you'll go to college, you'll pay rent on your own dorm or apartment, buy your first car, you'll have a significant other, perhaps choose to marry and have kids, maybe buy a house, go to grad school, etc. Those are some of the big-ticket items that are often cited as key budget drivers. However, in all this, try and not lose sight of the small things - a drive-thru coffee purchased everyday, over a year can easily add up to an extra $800 ($4x200 days); an extra-day-a-week of eating out for a couple, over a year can mean an extra $2500 ($50x50 days); etc. These small things can make a difference, and the more you plan for them, the less of a surprise they will be.
Ultimately, the aim of budgeting will also be to lead to a safe and secure retirement, when you don't want to have to worry about outliving your financial support system. Compounding is going to be your best friend in getting long-term benefits from budgeting and saving. See link from Investor.gov below for a handy calculator.
As you gain more experience and confidence, you can venture into investing. Budgeting will allow you to make provisions for saving enough to invest. There are enough stories all around about what investing can do for you - so I won't go there for now.
Good Luck.
Gulshan recommends the following next steps:
Updated
Peter’s Answer
Create an Excel sheet and allocate your income to different areas, such as recreation and transportation.