So, you’ve finally earned your first paycheck and are ready to start “adulting.” But how should you go about spending that money? Creating a budget can help you answer that question.
Creating a budget helps you spend more money on what you really want and feel good about it. When you plan and keep track of your spending, you’ll be surprised how much you really have to spend on what you want. However, be realistic. Creating a budget won’t do you much good if you can’t stick to it.
To get started, YourPortfolio in your Online Banking portal and Mobile Banking app provides you all the tools to link accounts and create budgets. What’s important is that you accurately keep track of your spending.
Creating the Budget
There isn’t a single right answer to how to spend your money. It all depends on your circumstances. A good place to start is using the 50-30-20 rule. This rule holds that you should spend 50% of your income on needs, 30% on wants, and put 20% into savings.
If you’re still living at home, maybe you won’t need to spend 50% of your pay on necessities. Maybe you’re taking care of someone else and need to spend more than 50% on necessities. The important thing when creating a budget is to base it on your actual spending habits.
Having a planned budget is really nice because it takes anxiety away from purchases. If you know exactly how much you can spend, you don’t have to be stressed about it.
Once you’ve got your budget, stick to it! You may not have gotten it 100% correct on the first try, and that’s ok! Adjust it as necessary and keep it up.
Building your Savings
Getting a budget started early is particularly important because it allows you to build your savings. Your first goal should be to build up an emergency fund with three to six months of expenses. After that, you can start to invest.
Mutual funds and index funds are both good options on this front. What you go with will depend on your risk tolerance, as well as other factors. It never hurts to talk to a financial advisor. Regardless of how you choose to invest, what’s most important is that you get started early.
The earlier you begin investing, the more you can take advantage of compound interest. Getting started just a few years earlier can have a huge impact when considering how much you will have accrued by retirement age.