Written by: M Katie Helle, CPA
Starting a budget is a powerful step toward financial independence. A budget helps track what money comes in, where it goes, and how it can support your goals. Whether you’re earning from a part-time job or an allowance, creating a simple budget gives you control over your finances.
Step 1: Know Your Income
Before budgeting, determine how much money you bring in each month. Income can come from a job, allowance, freelance work, or gifts. For those with a job, focus on after-tax income, as this is the amount you can actually use. If your income varies, estimate a monthly average or base it on your lowest expected income. Knowing your total income is key to understanding how much you have to work with.
Step 2: List Your Essential Expenses
Identify your “needs,” or the expenses you must cover every month, like transportation, phone bills, and school supplies. These essentials should be prioritized. One helpful guideline is the 50/30/20 rule: 50% of income goes to needs, 30% to wants, and 20% to savings. This can be a good starting point for dividing your expenses.
Step 3: Set Aside Savings
Saving even a small portion of your income helps build security for the future. Aim to save 10-20% of what you earn. This savings can help fund big goals, like a car or college expenses, or serve as an emergency fund for unexpected costs. Saving consistently, even a small amount, builds a habit that will benefit you for years.
Step 4: Track Your Wants
Wants often include things like eating out, entertainment, and hobbies. These expenses are where people most often overspend. Budgeting for wants doesn’t mean you can’t enjoy things—it just means you’re intentional about what you spend. If there’s something special you want, like new clothes or concert tickets, budget for it and adjust other spending to stay balanced.
Step 5: Set Financial Goals
Budgeting is more rewarding when it helps you reach clear goals. Whether your goals are short-term (like saving for a concert) or long-term (like college savings), setting goals keeps you motivated and on track. Write down your goals and check your progress monthly.
Step 6: Review and Adjust
Budgets aren’t set in stone; they should change as you grow. If you’re overspending, see if there’s a place you can cut back. Use apps like Credit Karma or You Need a Budget (YNAB) to track your spending and set goals. These tools can help you categorize expenses and see patterns over time.
Building a budget as a young adult is a great step toward financial control. By tracking income, setting aside savings, and balancing spending, you’ll create a roadmap for a financially stable future. Remember, budgeting isn’t restrictive—it’s about making your money work for you. Start small, be consistent, and enjoy the confidence of knowing exactly where your money goes.
Helpful Budgeting Tools
- Credit Karma: A free app that links to your accounts, automatically categorizing spending.
- YNAB: A proactive app that’s perfect for saving toward specific goals.
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Katie Helle is a Certified Public Accountant (CPA) and the founder of Scaled Accounting Solutions, a firm dedicated to helping small businesses and individuals manage their finances with confidence. With a background in both teaching and tech-savvy accounting, Katie is passionate about making financial concepts clear and approachable for everyone—especially young adults just beginning their financial journeys. Her goal is to share practical tips on budgeting, saving, and planning for the future, empowering teens and young adults to build a solid financial foundation.