Tips for Young Adults Navigating Their First Budget

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Build your budget based on your income after deductions for taxes, insurance premiums and retirement contributions. If your income varies month to month, use an average.

Separate your needs, wants, and savings

Review your bank and credit card statements from at least the last three months. Categorize your spending into three groups: needs, wants and goals. Needs keep your life going, wants to make it more enjoyable, and savings support your future.

Needs include rent, utilities, groceries, transportation, insurance, debt payments and phone bills. Wants can include dining out, subscriptions to streaming platforms, shopping, hobbies and travel. Savings include building an emergency fund, saving money to purchase a house or planning for retirement

Once you've categorized your expenses, you can begin building your budget. A popular framework is the 50/30/20 method:

• 50% of your paycheck for needs

• 30% for wants

• 20% for savings

Now review your spending and see how close you are to these percentages. You don't need to match them exactly, but use them as a guide to help you see where you can make changes. For example, you might see if you can cut back on takeout in order to save more, or research to lower your monthly debt payments.

Use budgeting tools that you find easy to understand and convenient. It could be a budgeting app on your smartphone, a spreadsheet, or even a notebook. Set aside a few minutes every week for a check-in. Review how much came in and went out, and prioritize your upcoming expenses accordingly.

Build an emergency fund

Unforeseen home or vehicle repairs, medical bills or a job loss can quickly become a financial burden.

It may help to keep a small fund aside for emergencies or a period of unemployment. Start with small goals, such as one month of your basic expenses, and build your way up to three. Keep these funds in a separate savings account, rather than your checking account used for everyday spending. Automate transfers to this fund on every payday to keep your saving momentum up.

Plan for debt payments

If you're considering taking out a debt consolidation loan, a can help you estimate how different loan amounts, interest rates and repayment terms from different providers can affect your monthly costs.

If you choose to tackle your debt yourself, two common methods to pay your debts include the debt snowball and the debt avalanche. With the debt snowball method, you pay extra on your smallest balance to get the ball rolling. Once you pay off that debt, you add the amount you were paying toward it to your payment on the next smallest debt. With the debt avalanche, you pay extra on the debt with the highest interest rate to reduce your overall borrowing costs. Once you pay off that debt, you put that money toward the balance with the next highest interest rate, and so on.

No matter what method you use, always be sure to pay at least the minimum required amount on all your debts to avoid late fees and damage to your credit score.

Keep it repeatable

Budgets work best when they become a routine. Pick a day to review your finances every week. Reviewing your spending weekly keeps the process from becoming so overwhelming you avoid it.

Always remember that the point of a budget isn't to track every single penny or never treat yourself. It's a tool to help you set spending priorities and plan for the future.

Contact Information:

Name: Nagarameshwar J.

Email: [email protected]

Job Title: Director

SOURCE: OneMain Financial