Many people don’t like the word “budget.” It can sound restrictive or intimidating. But a budget is just a plan for your money. It can make it easier to pay your bills and put money aside for saving. Learning how to budget when you’re a teen or young adult can promote healthy money management habits that will help you throughout your life.

Here is a step-by-step guide on how to budget as a young person.

Step 1: Calculate your income

The first step to building a budget is determining how much money you have coming in. How much money do you bring in from a part-time job, allowance, scholarships, or student loans?

Add these numbers up to get your total monthly income.

Step 2: Calculate expenses

Now determine how much money you spend each month. There are typically two categories of expenses, fixed and variable. A fixed expense, such as your rent or car payment, does not change from month to month. A variable expense fluctuates or is unpredictable, such as the cost of gas, groceries, or unexpected car repairs.

Add up your fixed expenses and take an average of a few months variable expensed to calculate your total monthly expenses.

Step 3: Income minus expenses

You can do a simple calculation to determine if you have enough money to cover your expenses. Subtract your expenses from your income.

For instance, if I make $1,000 a month from my part-time job and spend $800 a month expenses, then I have $200 left over to put towards savings or other financial goals.

$1000 minus $800 equals $200However, if I make $800 and have $1000 of expenses ($800 minus $1000 equals -$200), then I don’t have enough income to cover my expenses. In this case, I’ll have to make some cuts to my spending or find a way to make more money.

Step 4: Set savings goals

Budgeting also involves setting savings goals, both short and long-term. Planning to put even a tiny amount of money aside each month can help you reach your financial goals faster. The earlier you start, the better.

There are many bank accounts for youth in Canada available that you can open to manage your everyday banking needs including spending and saving. Youth accounts typically offer special perks like unlimited debit transactions and no monthly fees to help facilitate your savings.

Step 5: Put it all together

Now that you know your income, expenses, and any savings goals, it’s time to put it all together. You can create a budget using a spreadsheet, an online app, or even a pen and paper. Whatever works for you. It’s about writing down a plan to track your spending and adjust your budget when needed.

The Bottom Line

A budget is an important life skill. The earlier you learn how to do it, the better. Rather than spending haphazardly, a budget provides a plan for your money. It can help you stick to your financial goals and avoid going into debt.