Why does budgeting matter?
Budgeting is more than just keeping track of what you spend; it is a crucial life skill that impacts your future. You and other high school students are now starting to earn your own money through jobs, allowances, and internships. Learning how to budget will allow you to manage your money responsibly, reducing reliance on parents or guardians for financial support. Doing so will create financial independence, preparing you for a successful future as a young adult.
As high schoolers, you will soon face costs such as college tuition, transportation, rent, and groceries while transitioning into adulthood. By budgeting early, you can learn how to save for these expenses, making future financial responsibilities less overwhelming.
Additionally, budgeting also helps to prevent financial mistakes and debt in the future. Without a budget, it’s easy to overspend and not realize until it is too late. To avoid unnecessary debt and financial stress, it’s good to have a clear understanding of where your money goes and to learn how to balance your income and expenses.
Still, it isn’t always possible to plan for everything. Budgeting now can build financial security. For example, one important aspect of budgeting is creating an emergency fund. Even if you don’t think you’ll need it, with life’s unpredictable and unexpected expenses (a car repair, medical bills, an unplanned event, etc.), building an emergency fund can be a smart way to protect yourself financially from these surprises. This is something you can begin working towards in high school, by adding a small but consistent amount to an emergency fund which will always provide a good safety net for your future challenges.
What makes up a high school student’s budget?
When creating a budget, it’s important to know the basic components of it—namely income and expenses. Income refers to money that comes in, such as pay from a part-time job, an allowance, or money from gifts. Expenses refer to money that goes out, including anything from buying food and clothes to paying for gas or renewing a subscription service.
Another component of budgeting is knowing the difference between fixed and variable expenses. Fixed expenses are those that stay the same each month, like rent or the phone bill. While you may not have many fixed expenses yet, understanding these concepts can allow for a smooth transition to adult responsibilities when the time comes. Variable expenses change from month to month. These could be things like entertainment, clothing, or dining out.
Knowing the difference between these types of expenses can help students plan better to ensure they have enough money aside for what they need or want most when deciding how much to spend on occasional fun.
How you can easily budget:
If you’re interested in practicing budgeting, it may be helpful to set up a realistic scenario. You can imagine being a college student with a part-time job, needing to manage rent, groceries, transportation, entertainment, and savings for the future while balancing school and a social life. Try finding budgeting plans or worksheets online that categorize these expenses and require you to put money aside for short- and long-term savings, along with future investments.
Then, after making your budget, think about the challenges you faced. What categories did you have to cut down or reduce spending on? It may seem tedious, but doing this activity can help prepare you to make smart financial choices and plan for your future life.
You can also think about things you’re currently saving for and create your own current budget by using budgeting apps/websites:
PocketGuard (free and premium versions available): This app offers features such as budgeting tools, insights on spending, an overview of cash flow, and even allows you to set your own financial goals. It is also very user-friendly with a great interface.
Wally (free): This app requires that you manually enter your expenses, and uses AI to help manage your finances based on the data you input.
Buddy (free and premium versions available): This practical app tracks transactions and sets budgets, while also allowing you to invite friends or family into your budget to keep on top of overall expenses.
BudgetWatch (free): This online website by Wells Fargo uses charts to help visualize your spending and shows you your budget goals and updates.
Conclusion:
Overall, budgeting is an extremely valuable skill that puts students like you on a path to financial independence. Understanding income and expenses, knowing the difference between fixed and variable costs, and learning to prioritize needs over wants can help build healthy habits early on and let you avoid financial mistakes in the future.
If you haven’t started budgeting yet, now is the perfect time! Start small and track your spending on budgeting apps or tools to get into the habit of it. You will be setting yourself up for success in the future by doing so.