the importance of budgeting and saving.
It can sometimes be a very daunting place when entering the adulting world, especially when our knowledge regarding the world of finance is often very limited. Adding the pressure of University into the mix can make for a stressful financial mindset.
It’s crazzzzyyyy how much we’re not taught at school or uni and during a time like this, I think we have all learnt how important it is to manage our finances carefully. Whether you are at university or a graduate, I aim to discuss the importance of budgeting and saving in your early 20s.
When it comes to managing our money, it is vital that we get to grips on budgeting as it is the number one player in helping us to manage our finances better. Budgeting has always been an important skill to master and has become even more important during this pandemic! Budgeting is important as it will help you prioritise how and where you spend your money. Doing so will help you stay on top of your finances and out of debt! This is crucial as the last thing we want is more debt on top of our student loans (if you have any!)
what is budgeting?
Budgeting is all about working out the difference between your income and your outgoing expenses! I also get asked, ‘how do I create a budget?’ And I promise you, creating a budget is a lot easier than it sounds. To budget all you need is this simple formula: Income (any money that enters your account) – Expenses (any money that leaves your account) = The money you have left to spend, save or invest! This is called your disposable income and you need to make sure you budget this amount of money otherwise you can be left with very little at the end of the month! With your disposable income, you can create yourself a weekly budget which will give you a good idea of how much you can afford to spend each week. Eg: £400 disposable income ÷ 4 (number of weeks in the month) = £100 a week to spend! It is important to stick to your budget as closely as possible as this will allow you to become more disciplined with your money!
There are many budgeting tools and resources out there to help you manage your finances better. Apps such as Monzo, Yolt and Emma are a few great apps that are designed to help you budget! These apps provide you with an overview of your spending habits which can help you make adjustments to your spending if need be!
Now… onto the topic of saving! Savings are crucial for a rainy day. Savings are also vital so that we are able to invest in our future selves whether it be a weekend away, a new car or a new house! Without having some money put aside, you may find it very hard to achieve these things… Whether you are able to save £5 or £1000 each month, your future self will love you for it!
If you are someone that struggles to save their money, then here are a few simple tips to help you out:
1) Draw up a budget. Working out how much money you have available to spend for the month can help you work out how much money you can afford to put aside!
2) Open up a savings account. Doing so will allow you to keep your current account and your savings completely separate!
3) Start Small. If you are someone who has either very little or no income, it can easily put you off wanting so save, however starting with a small amount is better than nothing! Like I have mentioned previously, whether you are able to save £5 or £1000 away, it all adds up!
4) Don’t Panic. It can be very easy to panic about having very little saved up. However, it is important to remember that it is not the end of the world if you struggle to put aside money every month. This year has been a challenge - all that matters is that you’re trying!
Founder of All Things Money