Being an adult isn’t easy. You have responsibilities, though you have more freedoms as well. How you handle your responsibilities dictates how others see you. It also dictates how you see yourself.
If you act responsibly and make good decisions as an adult, you know you’re doing well. You can hold your head high at family reunions.
If you know you’re struggling because you’ve made poor decisions, though, you might not eagerly discuss what’s going on with you. You may realize you should improve in some areas.
How you handle your money always qualifies. If you’re making enough money at your job, and you’re not borrowing any from your parents, you’re doing well. If you’re also not racking up massive credit card debt, that’s another indication you’re doing fine as an adult.
If you have debt, that’s not necessarily the worst thing in the world since many Americans have at least a little. If you’re in the hole quite a lot, though, you should find ways you can improve. We’ll discuss that right now.
What Does Budgeting Mean?
The average American has about $90K in debt. That’s a lot when you think about it.
The average American income last year was less than $70K. That means the average American has more debt than they can pay off in a single year, without even counting all their other bills, grocery budget, etc.
Budgeting can help you avoid getting into debt or getting further into it. Budgeting means you’re planning and calculating how much money you need. You can set up a budget in different ways. You might set up a yearly budget, monthly budget, or weekly budget.
Any budgeting method can work, depending on your particular situation. If you don’t do this, though, you’re setting yourself up for failure. Budgeting involves basic financial planning, and the most successful adults do it.
How Do You Budget?
To set up a basic budget, you first look at your expenses and write them down.
You can look at your daily expenses, your weekly ones, your monthly ones, and your yearly ones. Often, you should make a spreadsheet where you write down your various expenses and how much they cost during each designated period.
Your expenses might include your rent or mortgage payment, depending on whether you have a mortgage or you’re renting a property. You should include how much your groceries cost. You should include any additional expenses.
You might pay a phone bill each month. You may have a monthly car payment. You may have a healthcare plan that costs a certain amount each month. You might have gas bill payments, electric bill payments, etc.
The Next Step
Once you determine how much you need each week, month, or year, you figure out how much you make each pay period.
Maybe your job pays you every week, every two weeks, or every month. No matter how your job pays you, you must figure out whether you have enough from your job to pay every crucial bill.
If you find that you leave no money for fun events, like going to concerts, dining out, or anything else you enjoy that’s nonessential, and you’re paying every cent you make toward vital things, you need a new job.
If all the money you make goes toward essentials, and there’s nothing left over, you must make a change.
If you figure out how much you owe each month for essentials, not counting anything extra or frivolous, and you don’t even make enough money to cover what’s most crucial, that’s even worse. You must make some changes immediately.
You can look for a new job. You might move back in with relatives if that’s an option.
You can look for a second job or move somewhere less expensive.
Assuming that you make enough money to cover all your essentials, though, you can set aside the amount you need for each vital bill every time your job pays you. Then, you can pay off your weekly or monthly expenses.
If you also have yearly or quarterly expenses you must pay, like property taxes or school taxes, set money aside for that whenever you can. Any additional money left over, you can use for fun things.
Of course, you can also put it in the bank and create an emergency fund. That’s usually a smart idea too.
You Should Teach Your Kids About Budgeting
These are budgeting essentials, the basics that you should follow to do well financially. If you don’t bother budgeting, you never know how much money you require during a designated period. You need that information because, without it, you’re just guessing.
Parents should teach their kids about budgeting.
If you have your own kids at this point, you should teach them some budgeting basics once they’re old enough. If you do that, you’re giving them the success skills they need to utilize later when they move out and are on their own in the world.
Budgeting Helps You Avoid Debt
Budgeting helps you fight debt. If you already have debt, it enables you to pay it off. If you have no debt right now, you can stay that way when you budget. If you know how much you need each month, you know what you must set aside when your job pays you.
A bill won’t blindside you unless it’s one you don’t usually get.
If you’re setting aside money in an emergency fund, though, even those emergency bills you didn’t expect won’t wreck your forward momentum. That’s because you can use the emergency money you set aside, and you won’t take on any debt to cover the unexpected expense.
Budgeting isn’t very difficult, requiring only some basic math. Once you set up your budget, it eliminates any financial guesswork. After you do it, you can have a target amount you must earn each month. Having that goal can give you a purpose.