Here’s a fact.
The majority of Australian young adults are clueless about how to budget. By numbers, according to a study done by Ubank in 2018, 86% of Australians have no idea how much their monthly expenses are. About 59% admit stressing out about their current financial status, and 44% of young adults worry about their financial future. These numbers are alarming, and it is a call for us to educate young people about the importance of budgeting.
Young Adults and Their Expenses
First, who are the young adults? Young adults refer to those people who are just starting to become independent. They probably are the new graduates or those who are just beginning to build their careers or businesses. They are in the early state of being adults, or as the name suggests, they are adults but still young.
Where do young adults spend their money?
In this generation, young people tend to go with the trend. They do what is trending nowadays. They live the YOLO lifestyles, the FOMO mindsets, the ‘travel is life’ mantra and the other viral hashtags. This lifestyle caused them poor budgeting skills. It may not be evident in their current status, but their future is at stake when they continue this lifestyle of leisurely spending much of their income.
What Is Budgeting?
Budgeting is knowing how much you earn, how much you spend and how much you save. Other names for budgeting are fund management, money management, financial management and personal money management. Their common denominator is the word management. Management means taking over something. Therefore, budgeting means taking over your finances. It is not the other way around. Never let your money take over you, or else stress and worry will never leave you.
One cliché illustration about financial management is having one whole pizza. You cut the pizza in such a way that everyone in the room gets a slice of it. In the same way, a sign that you are correctly managing your money is when you can distribute your income or earnings among all the things you need to pay for, including your savings.
But do not mistake budgeting with self-deprivation or being stingy. Spend your money on the things that bring you joy, as long as it would not result in exceeding loans and credits or lack of savings for emergency and future use.
Budgeting is living within your means. It is all about balance and proper management.
When Should You Start to Budget?
Now. Start your fund management right now, not tomorrow, not next month, not next year.
If you haven’t already, young adult or not, start budgeting your money as early as now. It is never too late nor too early when it comes to money management.
If you’ve already started, good for you. Keep doing that. You could also step up your budgeting skills, such as increasing your monthly savings or adding a source of income. Keep getting better, even in the area of money management.
Why Is Budgeting Important for Young Adults? [h2]
Having sound money management is essential for young adults because of several reasons. Some of them are as follows:
- Budgeting is rewarding. In the same way that everyday exercise rewards you with a healthy and fit body, budgeting gives you peace of mind knowing that your financial status covers all your bills and other expenses.
- Budgeting lets you enjoy your life in your early years. By enjoying, it does not mean the short-term stuff, such as luxurious leisures that you get to post on your social media in exchange for tons of likes. It is something more significant.
It may not be today, but soon, you will be able to afford the things you dream of when you start to stick with your budget at the very beginning. Your dream house, your dream car, your dream vacation, you can afford all of these early in your life if you start saving early.
- Budgeting makes you rich. Before you get too excited, being rich does not always mean having a lot of money, although it is one immediate result of budgeting. Personal money management makes you rich in a lot of other ways.
Budgeting makes you rich in knowledge because it takes a lot of thinking, techniques and strategies to disburse your earnings among all your expenses and savings. It also makes you rich with experience. The more passionate you become about budgeting, the more you would be eager to explore new ways to level up your fund management, such as additional income, increasing your savings, trying out new products and services that are truly worth their prices. Lastly, budgeting makes you emotionally and physically rich. Aside from the peace of mind and security it gives you, good financial management includes a budget for your health, such as vitamins, medicines, regular checkups and updated health insurance. All these benefits of budgeting give you a healthy mind and body.
- Budgeting prepares you for emergencies and unexpected expenses. Nobody can tell what the future holds for sure. You can be financially stable today and become unemployed tomorrow. You can be healthy today and become sick tomorrow. An accident or an earthquake may happen and destroy your home. Maybe it is not you, but your family member or close friend who needs financial help. In any way, it is beneficial if you can save for these unexpected events.
- Budgeting is for anyone. Contrary to what the majority believes, fund management is not only for wealthy people. Rich or not, young or old, no matter how much your monthly income is, budgeting is for you. Gone are the days when success is measured by how much you earn, how grand your house is, what car model your drive, what brand of clothes you wear and what unit your phone is.
Today, success is measured by how satisfied you are with your life, how secure your future is and your lack of financial liabilities. You can all achieve this through proper financial management.
Budgeting Ideas for Young Adults
The best way to manage your finances is by being aware of three things: your earnings, your expenses and your target savings.
- Know your earnings. Keep in mind how much money you earn. In that way, you can anticipate how much you have to spend. It will also let you decide whether your current earning is enough for your needs or if you need an extra source of income.
- Know your expenses. It means knowing not just your primary expenses but even the smallest thing that you spend your money on, such as a piece of gum or that tip you gave your hairdresser.
Based on your expenses, you can have an idea of where your money goes. It will help you decide what area you should spend more in and where you should spend less. Make adjustments to your expenditure based on your priorities and your budget.
- Know your target savings. What are you saving for? Is it only for emergencies, or are you saving for something else, such as a house, a new business venture or an out-of-country trip? Answer these questions to know how much you should save.
Putting a specific amount into your savings makes it feel more realistic, and you will feel more in control than having to save only whatever amount is left after settling all your expenses.
However, make sure that your goals are realistic and feasible by your earnings. Unrealistic goals make budgeting fail.
- Get a budget tracker app. Another useful tool in budgeting is to have that handy-dandy smartphone budget tracker app that will regularly notify you about the status of your finances. It takes the hassle out of creating a budget and tracking expenses. Most budget tracker apps offer various features to monitor and analyse your personal finances.
- Hire a financial advisor. Some people opt to hire a financial advisor to help them handle their finances rather than doing it alone. It is also a great option because financial advisors are licensed professionals whose main job is to help people with their finances. They help you make a plan so you can meet your financial goals and guide your progress along the way. A financial advisor can help you save more, reduce debt and invest wisely.
This is a challenge to all the young people: Enough with all the short-term social trending media goals and let budget goals be the new trend.