According to a 2020 NerdWallet study,* 41% of Gen Z feel anxious about their finances. 83% of Gen Zers and millennials have experienced regret about their spending decisions, which is more than older generations. Creating a budget is one way to help alleviate these feelings. The thought of putting together a budget can feel daunting and overwhelming. However, budgeting is vital for creating financial awareness, confidence and security and helping you achieve your goals. Here are four tips to consider when crafting your budget.
The word "budget" can be triggering. For many young adults, the term has become synonymous with feelings of complexity and restriction, cutting out spending money on the things that bring you joy in life. However, that could not be further from the truth. The objective of budgeting is to become aware of how you spend your money and make intentional decisions about where you want your money to go. I find it helpful and less threatening to refer to my budget as my "spending plan," as that's exactly what it is! Find and use terminology that most empowers you when creating your budget.
Keep your values at the forefront
A key to making your budget into a plan you'll want to stick with is identifying your values and prioritizing them within your budget. When listing your expenses, start with your non-negotiables. What are the things that matter most to you? This question is often forgotten, especially if you're feeling pressure to uphold certain values and traditions of your family or culture that you may no longer share. When creating your budget, it's paramount that you remain in the driver's seat of your finances. Keeping your "why" at the forefront makes spending decisions easier, and you'll be well on your way to creating a spending plan you're proud of and can more easily maintain.
It won't be perfect the first time
I've yet to see a young adult create a budget that worked perfectly the first time – including myself! Budgeting is not a one-time, set-it-and-forget-it kind of activity. You will often find opportunities to re-assess your budget from time to time as your values, expenses, and income change. You may find that you forgot to include an expense or two or that a cost you estimated may be higher than anticipated. These types of changes are perfectly normal and are to be expected.
There's no one "right" way to budget
You may be familiar with various budgeting frameworks like the 50/30/20 rule. You might have tried out the newest budgeting app and found that you need a different solution. It's easy to get swept up in other people's advice and recommendations, but don't feel like your budgeting process has to fit neatly into one method or another. Spreadsheet, cash envelopes, or even pen and paper - do what works for you. They are your finances, and you know them best.
Need more support in figuring this all out? A CFP® professional can help. Find your CFP® professional today at www.LetsMakeAPlan.org.