This post is for my younger brother and sister, who are both in the early 20s and recently admitted to me that they have no idea how to manage their money. Sigh. The cool thing is that they are both interested in learning how to handle their finances!
Kiddos, I’m starting with the absolute basics so don’t try to get out of this by saying you don’t know how.
1. Figure out how much money you have coming in every month. Do Mom and Dad regularly send you a check? How many hours do you average at your job? What other sources of income do you have? Add up your total monthly income.
If you get paid every two weeks, determine your monthly income with this calculation (simply doubling it is not accurate because most months are longer than 28 days):
Pay every two weeks x 26 = yearly pay/12 months = monthly income
2. Figure out how much money you have going out every month. Grab recent copies of your bill for your cell phone bill, utilities, cable, car insurance, gas, groceries, and anything else that regularly comes up. You don’t need to add this number up – yet. But it’s good to be familiar with your regular expenses.
3. You are ready to download my simple budget, which will walk you through creating a monthly budget. If you did step No. 1 and 2, this will be easy. Grab a pencil, whip out your calculator, and set the timer for 15 minutes. When you are done you will know if you are earning more than you spend or spending more than you earn.
If you are in the black (earning more than you spend), make sure you are saving some money each month. If you are in the red (spending more than you make), figure out what expenses you can cut back on.
Knowledge is power!