Money, Cash, Woes: How To Budget In 2016 As A 20something Using The App Mint Pt. 2

So you’ve heard about the excuses 20somethings make to avoid budgeting at all costs in part 1 of this article. Here’s a few again:

“I’m so young/There’s plenty of time.”

“If You Have Savings in Your 20s, You’re Doing Something Wrong”

Wrong, and wrong. Right NOW is the perfect time to start saving, and ask any adult and he or she will tell you exactly that. Budgeting skills doesn’t come naturally thought. I even find it difficult to track while working, paying electricity, gas, credit card bills, and making sure I buy enough food to keep me well feed and healthy.

But like most things these days, there’s an app for that. I turn to Mint to “be good with my money.”

Disclaimer: Mint tracks my net income each month, and I just make sure that I’m in the positive by > X dollars. Not really budgeting, but close enough.

The sample budget below for a 20something shows what you may or may not spend money on depending on how much parental support you still receive.
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Remember: This is just an example of what a 20something’s budget might look like, depending on family support and income.

Now the breakdown of the chart. Below I include tips to keep on track so you don’t spend more than you should.

1. Income

$40k/year with 30 percent combined Federal + State Income Tax Rate. If you make more, great job! Put more in the bank every month!

2. *Savings*

Most people would put savings at the bottom of a budget, something to be determined once all other expenses are accounted for. However, that undermines the importance of savings.

What you save shouldn’t be determined by how much you have left over after everything else. It should be built into your budget so that you spend accordingly in other categories.

3. Rent

If you live in New York or San Francisco, this might be near-impossible to find cheap rent, but do your best to at least try. Rent is the largest expense (besides maybe taxes) that most 20somethings have, so minimizing it is critical.

Tip: Find an apartment that costs 30 percent of your income or less per month. Look on multiple sites and compare prices. I know if might be “so college,” but look for a roommate — one, two or more (probably wouldn’t suggest more than three). Splitting the cost of an apartment would be much cheaper and also you’ll get to meet new people if you’re new to a city.

4. Utilities

Other than getting a roommate or cutting cable, the best way to cut down on utilities is being more conscious about leaving lights and appliances on. Turn lights off when you leave a room, but don’t freeze to death in the winter to save a few dollars on gas.

Three words: Energy-efficient lighting. The electricity used over the lifetime of a single incandescent bulb costs 5 to 10 times the original purchase price of the bulb itself. So go ahead and switch out your lights — you’ll be thankful in a couple of months.

5. Groceries

$50 per week might seem paltry to some, but it can be easily accomplished. You can spend more on groceries if it means reducing the amount of times you’re dining out or ordering food through Seamless (yes we all know it’s so easy). Eating out is one way that literally eats up a lot of savings.

Grab an apron and start cooking, often. If you “can’t cook”, learn.

Things like Blue Apron can encourage you to cook more and also won’t break the bank. If you’re down to cook for yourself, a great site I’ve used for recipes is Crockpot Ladies. If you’re prone to burning kitchens down with your cooking skills (or lack thereof), then teach yourself to cook. The Internet is a wonderful place with a bounty of free info on cooking even the most basic meals — make use of it!

6. Non-Grocery Meals

This means both going out to dinner and also your late night drive-thru-with-your-Uber-driver Taco Bell runs. Try to limit these as best as you can (especially during a night out). My general rule is one meal out per week (including weekends).

BUT if you must, only one crunchwrap supreme and/or cheesy gordita crunch per week.

7. Bars

Using Mint, I found I was often spending hundreds of dollars a month at bars. For people that wake up in the morning hungover and then feel 10 times worse after remembering how much you spent the previous night…these tips are for you.

Follow these in order: Set a limit. Pregame longer. Only bring a set amount of cash out with you instead of credit cards (Believe me, you’ll actually spend less rather than keeping a tab open).

8. Transportation

Ubers/cabs/metro/gas/etc. Split Uber rides with friends! Carpool if it’s realistic to do so. If weather is good enough and you have a safe route, buy a bike and bike to work/school/wherever. It’s like Orange Theory, except real life and not $60 a month.

Tip: I love Uber, but the same proactive people tend to get them for every pregame. If you’re proactive like me, use the split feature or make sure you get appropriately compensated with drinks once you arrive at the bar. If there is a surge, look at other apps such as Gett and Lyft. If all else fails, go old school and call a taxi — they are still around for a reason.

9.Student Loans

This is a big one for most people. Besides credit card debt (which by the way is the most costly type of debt. Pay your credit card bills completely before you start to save money). The average student leaves college with about $25,000 in student loan debt. The monthly payment on a $25,000 student loan is approximately $280, assuming a 10-year payment plan. Because student loan debt is basically unforgiveable, you’ll want to address it before you start saving. However, you should definitely accumulate a slush fund of cash in case of emergencies.

Follow this order of paying off any type of debts:

1. Pay off credit card debt
2. Pay off student loan debt
3. Pay off other debts
4. Save

10. Car Payment

New cars lose 20 percent of their value the second you drive it out of the dealership. If you buy a $20,000 car, you’re esentially taking $4,000 and lighting it on fire. Get a used car if anything — average used car monthly payments hover around $350, but you can definitely go cheaper if need be. Average auto loans are scheduled to last for about 5 years and 3 months. Used > New any day.

11. Car Insurance

I currently pay around $150/month for my car insurance, but that’s because I have a penchant for speeding. If you drive slower than I do, your car insurance pay will probably be a bit lower. If you’re looking for a lower payment after your 6 month contract is up, try scoping out different insurance vendors in your area on Progressive. I was shocked to find out that the variability in monthly payments was greater than $100 from the most expensive to the least.

12. Car Maintenance

Three categories for cars? Who knew they were so expensive? Your car every, approximately every 2500 miles, will need an oil change/tire rotation/[insert other common car maintenance topic here]. $50 a month is probably a low-ball estimate of the true cost, especially if you have something bigger go wrong with your car. However, make sure you do get routine maintenance done to prevent any minor issue from becoming a major one.

And don’t slack on these just to save money. You’ll end up saving more in the long run by getting routine oil changes and actually doing the scheduled maintenance that your car dealer outlines.

13. Cell phone bill

If you can stay on your parent’s family plan and just Venmo them, I’d highly recommend doing so as it’s often far cheaper than having an individual plan for yourself. If you are fortunate enough, you can just thank your parents for continuing to support you by paying your bill every month like mine do. Thanks Mom & Dad!

Utilize your parents. If that’s not an option, turn off cellular data once you’re getting close to your data limit.

14. Healthcare

Thanks to relatively new healthcare laws aka you rock Obama (but actually), 20somethings can stay under their parents insurance until they turn 26. If you’re 26 or older, you’re out of luck, and are probably looking at something around $170/month for basic insurance plus whatever co-pays you are required to pay per visit.

Tip: Utilize your parents x2. If that’s not an option, do some good ol’ fashioned google research on your health insurance options.

 

In summary: There are a lot of tips here. Most people would read a list like this and say: “Well, a lot of this stuff is pretty intuitive, and I think I’m okay with money right now — no real need to change my whole lifestyle just to save a few extra dollars here and there.”

The goal of this article is to get you to start thinking about money, especially saving. Don’t do a financial diet for two weeks and quit. Accumulating wealth is something that can be educational, rewarding, and fun if you adapt your mentality and lifestyle to make it that way.

More to come…

 

Sign up for Mint & download the app on your phone.

“The only thing standing between you and your goal is the bullshit story you keep telling yourself as to why you can’t achieve it.” ― Jordan Belfort

Full disclosure: Jordan Belfort is probably not the best person to model your wealth accumulation strategy after, but this quote nicely summarizes why excuses shouldn’t prevent you from saving.

Think differently about saving:

Your savings should not be determined by how much you have left over after everything else — Your savings should be built into your budget so that you spend accordingly in other categories.

Start saving today. When you build up to $10,400, you will be statistically wealthier than half of your 20some friends!

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