It’s graduation season! Students have completed their classes in subjects like English, history and science and are proudly displaying their diplomas. But many graduates have one more course to pass:
Managing money may be one of the biggest challenges for young adults living on their own for the first time. But learning the basics – such as how to create a budget – can help you find the right path.
According to the American Bankers Association, knowing how much you have to spend and where your money goes is essential for financial success. That means it’s time to create a budget.
- Income: It’s important to learn what you’re working with. Using a notebook, spreadsheet or worksheet, list your monthly income sources – take home pay, overtime, tips, etc. Include as much information as possible.
- Expenses: List your current expenses – and don’t leave anything out, no matter how small the amount! This will cover expenses related to housing, food, education, health, transportation, entertainment, credit cards, saving/investing and other miscellaneous sources.
- Monthly Net Income: Then take your total monthly income, subtract your total monthly expenses, and write down your monthly net. When you know what you have, you can make informed decisions on your budget and spending habits.
Expenses and income equal? You could be getting by, but are you prepared for unexpected expenses? Look into a regular savings plan.
Expenses less than your income? This is good news, and you should be able to set reasonable financial goals to make your dollars go further.
Expenses more than your income? This is a problem that needs immediate attention. Visit Bank of Luxemburg to help you before you fall deeply into debt.
Determining your monthly net income may bring up more questions about how you use credit, whether you have enough money to pay monthly expenses, or about developing savings goals.
Keep checking the Bank of Luxemburg blog for advice on sticking to a budget and cutting expenses, and you’ll be sure to get an A+ in Budgeting 101!