How To Budget And Save in Your 20's | Tips and Tricks

Hi, hello, how's it going? It's Alana and welcome back. So today I want to talk about something that I feel like is very important to talk about, especially these kinds of conversations are so crucial with young women, and I think this type of conversation needs to be normalized. Today I'm talking all about finances, specifically how to budget and how to save. I made a video all about financial tips for your 20s. So if you wanna watch that, it'll be up here. I figured I'd kind of dive in on a more specific issue within that, which would be budgeting and saving and the importance of it, and how to do it, as well as tips and tricks. For one, I'm obviously not a financial advisor. I did take a lot of business classes in school. Growing up for me and my family, I would say money was definitely on the tighter side, and I feel like from a young age then I saw the importance of budgeting and saving and the value that each dollar has. As someone that exists in the influencer sphere, I just feel like there's this heavy push for overconsumption that is just not a healthy message to be pushed out. Like, yeah, it's fun to watch a summer haul of someone spending $1,000 on a bunch of fast fashion, but I don't think it's super healthy to promote that way of living, and obviously everyone's situations are different, and just so many people can't even afford to think about doing that. I feel like with being young, especially in your 20s, there's this narrative about needing to live your life to the fullest, and a lot of people equate that with spending a lot of money on things that you can't necessarily afford and on short-term pleasure, and I feel like we're constantly pulled between these two sides of, like, how do you save money for the future? But you only live once, you're only young once, so why not enjoy my youth and my freedom now? I feel like financial freedom and stability is the ultimate way to treat yourself and to truly appreciate yourself by making money and then spending it all, living paycheck to paycheck. It's at the cost of your own future, and I think it's really important to think about your future goals and where you want to be and how you want to be living, and if you want to have a family and all those things. The decisions that you decide to make now financially really will affect you in the future, and a lot of times that means delaying some of that instant gratification we look for. Just overall, I feel like financial literacy and responsibility equates to freedom and empowerment and just really taking a hold of your life. That's me rambling a little bit about the importance of being knowledgeable about your money, about how you're spending it, where it's going, etc. First off, we're going to talk about budgeting. In case there's anyone out there who just has no idea what a financial budget is, it's basically saying that you're only going to spend X amount of money in different categories each month. Obviously, with everything in this video, it's going to be extremely dependent person to person on your situation, on what you need to spend money on. In my case, I don't have a consistent income. I technically work like project to project, so it makes budgeting trickier, because it's not like I'm making a certain amount each month and then I can fill in the little buckets with that. Every month differs, so it's going to be different person to person. When it comes to making your budget, it's first and foremost super important to list out all of your expenses as well as all of your income. That's kind of the first place to start. The way that I recommend doing it if you've never made a budget is taking a look at the last three months of expenses as well as income and kind of going off of that. The way that I do it personally is I use Mint, which is an online website that basically helps you manage your money and know where it's going. You link your cards and your bank to it, and it will basically divide up all your expenses into different months as well as different categories, which is extremely helpful to know where your money is going. In my opinion, it doesn't do it perfectly, and sometimes it's confusing if I'm paying off a credit card bill or if I made a Venmo to a friend. It obviously doesn't take that into account. What I do is I will go through Mint and then I will take all that information and I'll still make my own spreadsheet, but Mint honestly makes it 100 times easier because it basically pre-organizes all of your expenses for you. So then when it comes to making that budgeting spreadsheet, I basically split it out into a bunch of different categories like rent, utilities, transportation, groceries, eating out, entertainment, etc. In order to make a budget for the future, like I said, you have to kind of look at your past expenses. So I think it's important to go through all your expenses and divide it in those categories and look like, okay, how much am I spending? How much money am I making? What debt might I have to pay off? What might I want to add to retirement? Make sure you add up exactly how much you're making, exactly how much you're spending so you can know where you're at. Like I said, I think it's easiest when you're starting out to basically just be very observant of what you're doing before you try to assign a set budget and number to each category. It helps to start off by keeping track on a weekly basis. There's other really great resources out there like YNAB is an app where you have to basically input all of your expenses as you spend money, which forces you to be very mindful of where your money is going, which I think is super helpful. So once you're kind of aware of your expenses, as well as like your incoming money, it can kind of be a little intimidating to try to figure out where to assign different amounts of money. And I talked about this in my last finance video, but I feel like the 50-30-20 rule can help quite a bit. I think it's a great rule if you're just not really sure where to start, how to divide up your money. Visualize a little pie chart here. So you got your 50, you got your 30, and then you got your 20 chunk. So the 50% chunk of your income should be spent on things that are central. Think rent, utilities, transportation, phone bill, gas, groceries, etc. That's where you should be budgeting 50% of your money. So 30% should be spent on things that are not essential but bring you joy. So think about dining out, entertainment, self-care. So that area is where you get to have a little bit more fun, you know, live your life, but make sure you're not overdoing it in that category because a lot of us, I feel like, will tend to expand that 30% a little bit larger for, you know, a new swimsuit or new clothes. And then the 20% portion should be spent on saving, paying off debt, retirement planning. I highly recommend starting an emergency fund. This is really important for saving for your future. I mean, clearly, anything could happen. We're in a pandemic right now. Ideally, at least three months. If you could work up to three months, that's amazing. And then try to work up to six months of savings and then 12 months of savings is just as a cushion to have in case just, like, things go wrong, because they clearly do and it's good to be prepared. I talked about this in the other video as well, but please start your retirement. Now is the time. The younger, the better. Your future self will thank you so much for doing it. Basically, when it comes to building retirement, it is compounded. So it's going to grow over time. So the sooner you start, the better. If you do not have a job that provides a 401k, you can start a Roth IRA on your own today and slowly start adding to that. That's what I did when I was, like, 19. And so I've had my retirement just growing slowly. It's getting there. So when it comes to tracking your money within that rule, I find it easiest to put everything on my debit card or my credit card if I'm trying to gain points. But again, be careful. Low credit cards do not spend more money than you have. And I feel like that has made it really easy for me to keep track of everything I'm spending my money on. On the flip side, if you really want to get a hold of your finances, if you're on a tighter budget and you really can't afford to go over, there's the age-old, like, cash envelope system. Like, I saw my parents doing this growing up where basically at the beginning of the month, you draw out the money out of the bank, exactly what you need for the month, and you put it in different envelopes for that month. So, like, you got your rent envelope, you got your groceries envelope, you got your gas envelope, you got your entertainment envelope. And you put in whatever you decide is an appropriate budget for that category. And once your, like, coffee envelope is out of money, you've, you know, no more Starbucks for you. And it kind of forces you to make sure you're spending within your means and not just being like, oh, I had a rough day. I'm gonna get Postmates again and spend more than I should instead of, like, eating a meal at home. Your envelope system is gonna be like, uh-uh, you don't got money for it. I feel like a lot of the tools that are a little bit more strict, like I said, are great at the beginning. And then with time, as you become more mindful with your money and where it's going, you can kind of, like, loosen up, find what works for you. But sometimes you just need, like, a shock at the beginning to really, like, get you into place. For me, creating a set budget with a set amount of money at the beginning of the month isn't, like, a perfect system for me. Like, I've tried that and it doesn't quite work. So basically for myself, at the end of every single month, I fill out a spreadsheet of everything that I spent money on for that month and I break it down by section, like I said. One thing that I do that's a little bit different and forces me to be more mindful of my money is that I will break down each section with, like, specific items. So with my eating out section, like, I'll write down, like, I went to the sushi restaurant and I spent this much. I went to In-N-Out and I spent this much. I spent this much on Jamba Juice. And so I'll have, like, 10 entries all for eating out for the month as well as, like, clothing. Like, if I got any clothing that month, like, I'll write down, like, okay, I got this specific swimsuit from this store. I got this shirt from here. And it really just forces me to be much more aware of where my money's going because sometimes it can be easy to, like, get new art supplies and a book from Amazon. And when it's all grouped together in shopping, it's kind of a little bit harder to be keeping track of specifically where you're overspending. So I found it helpful for certain categories to list it out by item. If I'm getting, like, cotton balls at CVS, like, I'm not gonna write that down. But for slightly bigger purchases that are, like, considered extra and things I don't necessarily need, I want to make sure I'm very aware and remind myself that I spent money on it. So when it comes to saving money, we all have areas, for the most part, that we can cut back on. Obviously there's exceptions, even if they're little, where you can cut back if you're determined to start saving. Like, in my case, like, I like shopping. Like, I wanted a new swimsuit for the summer and a lot of times, like, I'll want to update my camera gear. But in order to justify those purchases, I have to make sure that I'm sacrificing in other areas. So, like, if I'm gonna get a swimsuit for summer, like, I'm gonna make sure I'm not buying other clothes or that I'm not buying, like, beauty products or just things that are excessive that I don't need and that I'm being careful of what purchases I'm making as my, like, splurge purchases. I think another important thing is rethinking your luxuries. I feel like it's easy to justify, you know, a cup of coffee every day or getting Postmates several times a week as, like, oh, this is my, like, treat myself moment. But if you have big saving goals, like a new camera or a car or even a home in the future, you need to rethink what your luxuries are and redefine them. That has really helped me mentally because it can be easy to just, like I said, be like, oh, well, I just want it. And, like, I've been working hard, so I'm just gonna get it. When in reality, I know that by purchasing that, it's gonna take away from something bigger that I'm gonna enjoy in the future or potentially something that is a greater investment in my future. So, for saving, I think it's really important to set yourself short-term goals and long-term goals. You can invest in yourself in different ways. Like, for some people, a short-term goal might be buying something that's, like, more of a splurge or it might be investing and traveling and kind of having, like, a cultural experience. So it kind of depends across the board. But when you start to set those goals and have them in your mind, that looks like, let's say, I want to buy a house one day down the road and invest in real estate. When you have that idea planted in your head as, like, an 18-year-old, 20-year-old, 25-year-old, et cetera, it's gonna make a big difference in the way you view your finances and the way you spend money day-to-day. It's also good to keep in mind the differences between needs and wants when it comes to actually saving your money. I think a lot of times you can be like, oh, I need this bigger apartment. I need more space. And it's good to kind of, like, take a step back, reevaluate. Like, okay, do I actually, though? I'm young. Like, I can live in a, like, less nice apartment. Like, I'd rather rough it now than when I'm, like, 35. Or like, oh, do I need a car right now? Like, no, public transportation is cutting it for me and it'd be extra to do it otherwise. So I think it's good to ask yourself those things, especially when it comes to bigger purchases or investments. Also within your finances, you can set up automatic withdrawals with your bank, which is really helpful. When your income comes in, you can say like, okay, 20% is going into savings off the bat. So you don't even see it. You don't even touch it. And therefore it's gonna be set aside for emergency fund, your debt, et cetera. Spending time with people who have really bad spending habits and who aren't in the same position or have the same goals as you can really make a difference in where your money is going. And I think it's very important to be careful with comparison and try to remove that. Because you can see a friend spending $300 on a pair of boots and it's really easy to compare yourself to them. But you don't know where their money's coming from. You don't know if they have, like, a credit card from their dad or if they themselves are in a ton of debt. It's easy to see people live a certain way and wanting to imitate that. I think it's important to take a step back and, like, you know, focus on what's important for you. When it comes down to it, it's all about mastering what you have, not how much you're making. I really love this quote from Warren Buffett. He says, Don't save what's left after spending, but spend what's left after saving. So when it comes to wanting to be better with your money, save your money, and just overall become more financially responsible, a big part of it is just shifting your mindset and re-evaluating what's important to you and re-evaluating the way that you see money and you spend money. So overall, I hope these tips are helpful when it comes to learning how to budget, learning how to be much more mindful and responsible with your money, as well as saving for your future and your future self will be so happy that you do. Let me know if you have any questions or if you have any tips that you think people should know. Please leave a description. I will be hanging out down there, chatting with you all. As usual, thanks so much for watching. Until next time, love you. Bye!