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If you’re like most 18-year-olds, you probably don’t have a lot of experience managing your money. That’s not necessarily a bad thing; after all, there’s a lot to learn when it comes to personal finance. From budgeting to investing, there are a lot of moving parts to successfully managing your money. But don’t worry, we’re here to help. In this beginner’s guide to managing your money, we’ll cover the basics of how to create a budget, how to save for short- and long-term goals, and how to make your money work for you.
How to Create a Budget?
The first step in managing your money is creating a budget. A budget is simply an overview of your income and expenses; it helps you track where your money is going and makes it easier to make informed decisions about your spending. Creating a budget can seem daunting, but it doesn’t have to be complicated. Here are a few tips:
1. Determine Your Income sources: The first step is figuring out how much money you have coming in each month. Do you have a job? Do you receive financial aid? Make sure you include all sources of income in your budget.
2. Track Your Expenses: The next step is tracking your expenses—both fixed and variable. Fixed expenses are things like rent and car payments; they stay the same each month. Variable expenses are things like groceries and gas; they can fluctuate from month to month. Once you know where your money is going, you can start making adjustments to ensure that your spending aligns with your goals.
3. Make adjustments as needed: Your budget isn’t set in stone; as your income or expenses change, be sure to update your budget accordingly. And if you find that you’re consistently spending more than you’re bringing in each month, don’t be afraid to make some cuts so that you can get back on track financially.
Saving for Short-Term Goals
Once you’ve created a budget, it’s time to start thinking about saving for short-term goals—goals that you want to achieve within the next year or two. Some examples of short-term goals include saving for a down payment on a car or establishing an emergency fund with enough cash on hand to cover three-to-six months’ worth of living expenses. When it comes to saving for short-term goals, here are a few tips:
1. Figure out how much you need to save: The first step is determining how much money you need to save in order reach your goal. Once you know the total amount, break it down into smaller chunks so that it feels more manageable. For example, if you want save $1,000 for a down payment on a car within the next year, that means setting aside $83 per month—which should be achievable if you’re sticking to a budget.
2. Decide where you’re going save: The next step is deciding where you’re going save your money—a savings account at your bank or credit union is typically the best option because it offers easy access to your cash if needed while still earning interest on your balance (unlike keeping cash under your mattress).
3.(Create—and stick to—a savings plan): Finally, once you’ve opened up a savings account and figured out how much you need to save each month, it’s time to put together a savings plan and stick to it until reaching your goal. This might mean setting up automatic transfers from checking into savings each month or making regular trips to the bank to deposit cash into savings manually; whatever works best for you, just be sure that once the money is in savings, you leave it there until reaching your goal so that can avoid any temptation spend it instead!
4. (Consider using apps or programs): These days, there are all sorts of apps that can help when it comes time to manage finances—including saving for short-term goals! If struggling to stick to your savings plan (or if simply want extra help staying on track), check out some popular options like Mintor You Need a Budget (YNAB). YNAB in particular offers “goal tracking” functionality that can help you to see your progress over time and stay motivated to market that final push to reach your goal!
Reinvest saved money!
The sooner you start reinvesting your saved money, the better off you’ll be. Saving money is only part of the equation – in order to truly grow your wealth, you need to reinvest that money back into assets that will generate even more income down the line. There are a lot of different ways you can go about reinvesting your money, but some of the most common include investing in stocks, bonds, and real estate.
No matter what route you decide to go, the important thing is that you start reinvesting your money as soon as possible. The sooner you do, the more time your money will have to grow, and the more wealth you’ll be able to build over time.
There’s no denying that personal finance can be complicated—but learning the basics doesn’t have to be too difficult or time-consuming! By following the tips laid out in this guide, you should be well on your way to successfully managing your money before you know it! Best of luck!