Budgeting 101 for 20-Somethings
10/2/2017 9:54:36 PM
Budget

Most 20-somethings struggle with budgeting. The process can be intimidating because young adults are often not well versed in financial literacy. Fortunately, financial experts and websites like www.feedthepig.org can educate young adults on fiscal knowledge and how to create a sustainable budget. Butch Ferdinandsen, financial planner with Ferdinandsen Financial Group, says the foundation of a good budget is to not spend more money than you earn.

There are two types of spending: essential and discretionary. Essential costs are unavoidable, like rent and food. Luxuries like concerts, movie tickets, and new jewelry are discretionary. Identify where you are spending your money. Be truthful with yourself on your spending and pinpoint every penny spent on everything from gas to gum. This may be tedious, but the more thorough you are, the more accurate your budget will be. Ferdinandsen recommends software such as Quicken or Quickbooks, which provides spreadsheets to monitor monthly expenses. A checking account ledger or online site can serve a similar purpose. "It’s important to keep track of where your money is going,” says Ferdinandsen. "If you discover you’re spending a lot on wants rather than needs, you can likely find ways to save money, either for an emergency savings account, a home, or retirement. 

At this point, you can determine where your money has gone. If you can shave $2 a day off your spending each month, you’ll save about $730 a year. This extra money can go to student loans or an emergency fund. Ferdinandsen suggests creating a savings account to allow for six months of expenses for a single person, or three months expenses for dual-income couples. If you anticipate a major purchase in the near future, increase the amount you are saving.

Any budget that fails was probably doomed from the beginning. One key to ensuring a realistic, feasible budget is to establish personal financial goals. Make a list of short and long-term goals and rate these goals on a 10-point scale. This will allow you to focus on saving for the most important targets first.

Once you have established your budget, follow it. Know which of your expenses are not negotiable and which ones should be left for a more financially sound period. Ferdinandsen also recommends young people take advantage of employer retirement funds such as 401k accounts or consult a financial planner for other saving options. "Too often, young people say ‘I’m young, I got time,’ and they’re right, but the earlier they start saving, it’s a huge advantage, even if it’s just a small amount.” He also advises young people to keep their debt in check. Pay off credit card debt as quickly as possible.

Budgeting monitors your cash flow, structures your spending, and opens your eyes to the realities of your expenses. Start honing your money-saving skills today. 

For more information or to speak with Ferdinandsen, call 337-491-9236.
Securities and Investment Advisory Services offered through Woodbury Financial Services, Inc. Member FINRA and SIPC. Ferdinandsen Financial Group is a marketing name. 2356 E. McNeese St. Suite 100 Lake Charles, LA 70607
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