Hey y’all and happy Monday and hope your weekend was great! I spent the better part of the past four days watching March Madness. Now I’m in denial there’s three whole days without any basketball to watch! Anyways, today I want to talk about something a little different- budgeting and money management for young adults. You may remember from my New Year’s Goals post that I aimed to spend less and save more in 2019. Let’s just say that didn’t go so well during January and February. Therefore, I’ve been thinking a lot lately about how I can manage my money more responsibly.
My money management as a young adult hasn’t been completely careless. I have money in a savings account, I pay my credit cards off every month, and I don’t have any debt. However, I do have some things I’ve been convicted of and want to improve upon. I realize that finances are a very personal topic, and therefore I’m not going to share specific numbers. But I do feel led to share some general wise financial practices that I’ve adhered to in the past and want to continue to follow, as well as some new habits I intend to adopt.
(Photo by Amelia Cassar Photography)
The Dave Ramsey Plan
There’s a good chance that you’ve heard of Dave Ramsey. I’ve never taken his Financial Peace University course before, but I’m familiar with his Seven Baby Steps to financial freedom. I am using those steps to guide my own personal financial goals. The first step is to save $1000 for a starter emergency fund, second step is to pay off all debts minus your mortgage, and the third step is to save 3-6 months of expenses in a fully funded emergency fund. I am blessed not to have any debt, and it’s something I definitely don’t take for granted. Right now I am working on Step 3. I am close to having three months of expenses put away in my emergency fund, but I would love to grow it to six months worth of expenses. So next I’m going to share how I plan to go about reaching this goal.
Continue to Use My Credit Cards Wisely
Dave Ramsey isn’t exactly a fan of credit cards. However, I believe they can be beneficial if you use them wisely and don’t charge more than you can pay off each month. If you treat your credit card like a debit card and pay the full balance each month, then it actually works to your advantage. First of all, it’s easier to dispute charges on a credit card in the event of fraud. Also, most credit cards have a rewards program where you can actually earn cash back, gift cards, or airline miles by using your card for essential purchases each month.
Paying off your credit card each month avoids interest charges that will result in you paying more than the retail value of purchases. I’m so thankful that my parents taught me how a credit card works and warned me against racking up interest charges, and that I listened. So in working towards my financial goals, I will definitely continue to use my credit cards responsibly.
Set a Monthly Budget and Stick To It
Now I will get into the areas of personal finance that I need to improve upon in order to be a wiser steward of my resources. I currently have a decent emergency savings account and don’t rack up credit card debt. However, I have lacked discipline about setting a monthly budget and sticking to it. I traditionally have just kept an eye on my credit card balance, making sure it didn’t get too high so that I wouldn’t be able to pay that and other bills out of my checking account each month. As a result, I wasn’t adding significant amounts of money to my savings account each month. And there have definitely been some months that I’ve taken money out of my savings account to fund non-essential purchases.
My Monthly Budget Formula
So I’m determined to end this cycle in order to become more fiscally responsible and build my savings. I’ve come up with a “magic number” for my monthly budget. Here are the steps I took to arrive at this magic number:
-Start with my net income from each paycheck
-Subtract rent, utilities, and average electric bill cost
-Subtract cost of Internet and streaming services
-Deduct car & renter’s insurance costs
-Deduct therapy costs
-Subtract 10% of net income to put into savings
-Subtract 10% of net income to tithe to my church
The number that I’m left with after I make all these deductions is my monthly budget. This is the amount I have each month to spend on groceries, gas, eating out, shopping, and entertainment. Of course it’s not a requirement for me to spend this amount of money each month. But having this number in place will enable me to keep tabs on my spending each month to make sure that I’m able to put money into savings each month, and avoid taking money out of savings to fund unnecessary shopping. It will also help keep me accountable to make sure I’m being obedient to the Lord by tithing to my church each month. More about that next!
Christians are encouraged to give 10% of their income to their local church each month. This is called the tithe, and originates from the Old Testament.
Genesis 28:20-22 says, “Then Jacob made a vow, saying, “If God will be with me and will keep me in this way that I go, and will give me bread to eat and clothing to wear, so that I come again to my father’s house in peace, then the Lord shall be my God, and this stone, which I have set up for a pillar, shall be God’s house. And of all that you give me I will give a full tenth to you.”
Then in Numbers 18:26, the Lord tells Moses, “Speak to the Levites and say to them: ‘When you receive from the Israelites the tithe I give you as your inheritance, you must present a tenth of that tithe as the Lord’s offering.”
The most beautiful thing about having a relationship with the Lord is that His love for you is not based upon anything you do, but rather completely on Him sending His perfect son, Jesus, to pay the price of your sins through his death on the cross. Therefore, I don’t need to tithe 10% of my income to the church each month in order to earn God’s love. However, note that both of the verses above mention that the Lord was the one who gave His people their resources in the first place. Thus, tithing 10% shows that I recognize that everything I have comes from God in the first place. So in response to to everything He has done for me I should joyfully give Him my firstfruits financially.
My Shortcomings with Tithing
I will confess that I have not been faithful with tithing 10% of my income each month. Selfishly, I would rather shop the latest sales, and treat myself. God doesn’t love me any less for this, but the Holy Spirit has convicted me lately, because this behavior indicates I have been valuing temporary things over the eternal treasures of God’s kingdom. It also shows that I don’t fully trust God with my finances and that He will provide everything I need because He is enough.
Proverbs 3:9-10 says, “Honor the Lord with your wealth and with the firstfruits of all your produce; then your barns will be filled with plenty, and your vats will be bursting with wine.”
I look forward to seeing what God has in store as I strive to be more obedient to Him with my finances.
Budgeting and Money Management- What’s Next?
So now y’all might be wondering, “what does this mean going forward?” Or, “it’s a bit ironic that this girl who loves to blog about fashion finds and the latest sales is now telling us we need to save money and be more responsible with our finances.” No, this is not what I mean at all! And this blog is definitely not going to morph into a full-fledged personal finance/extreme couponing/thrifting blog. It simply means that y’all will probably be seeing fewer new purchases from me, and more styling outfits that are already in my closet. And I will still share sale alerts and shopping links with y’all. Just like dessert can still be part of a healthy diet if you balance it with nutrient-rich food, shopping can still be part of a healthy financial life if you spend wisely and stay within your means!
One thing I’ve already done that was super empowering was cancel $65 a month of unnecessary subscriptions. Although $65 a month doesn’t sound like too much in the grand scheme of things, think about what you could do with $780 extra a year! Also, if there’s a big purchase you want to make or vacation you want to take, set aside a little extra into savings every month. Then when the time comes, you can make your purchase while still staying within your budget and without depleting a significant portion of your savings either.
Also, you just have to recognize that you can’t do it all. You have to prioritize your purchases/expenses, and say no to some things. For instance, one of my good friends is getting married out-of-state in May. In order for me to travel to her wedding and stay within my budget, I will need to say “no” to most extra shopping over these next couple months.
Exercise in Contentment
Thanks so much for reading, and I hope you found this post on budgeting and money management for young adults helpful. I realize this is a very personal topic, but I simply felt led to share and I hope that other young adults out there find this post a valuable resource. Overall, I feel like this exercise in being more disciplined with my finances will help me to be more content with what I have, and less focused on acquiring more. It’s also going to require me to say “no” to things that may seem good in the short-term in order to reap long-term benefits.
I would love feedback on this post, and if you have any requests for follow-up posts on budgeting and money management for young adults, please share them with me! What are some of your favorite tips for budgeting and saving money?