Single and in your 20s? There’s enough to worry about between starting a career path, finding a partner and learning to be independent; managing your personal finances can seem daunting. It’s so important though to make sure you have a plan, stick to your budget limits and plan for emergencies. There’s nothing scarier than the using a credit card to pay for variables that you can’t afford on your monthly income.
Although there are plenty of apps, websites and banking tools that can help you budget your income, I’m still a believer of managing and tracking my finances using a good old spreadsheet. Here are my tips, many from personal experience, for staying on track financially in your 20s.
Distinguish your fixed expenses from your variables–meaning, in one column make a list of the expenses you have to pay monthly. This is typically rent or a mortgage payment, car payment and auto insurance, health insurance, renters’ insurance, phone expense, gas expense, electric/water bill and any student loan payment you may have. Variable or discretionary expenses are things like cable and internet at home, entertainment and going out money, shopping money, etc.
Take your net monthly income and apply it first to your fixed expenses. If possible, try to save between 10-15% into a high-interest bearing savings account. Even 3-5% is saving something, so I wouldn’t omit savings from your fixed expenses list. Then, I recommend taking what’s leftover and withdrawing it as cash. Utilize an envelope method for your discretionary expenses and determine what’s most important (aka, what gets the most spending cash per month). Common envelope labels would be groceries, restaurant/going out, hair cuts, gifts, home/apartment needs and any other miscellaneous spending.
You will be surprised how well this method works if you can be disciplined to stick with it. I like the cash in envelopes method more than an app that tells you what you spend monthly on various expenses because once the cash is gone, it’s gone for the month. It’s easier to stick to a budget if you’re only allowing yourself to pay for discretionary expenses in cash.