I am 24 and I’ve never had a budget — here’s where I started
Picture: Nataliya Vaitkevich Budget
I am 24, and I’ve never had a budget. Please don’t tell my dad.
It’s not his fault, I grew up in a very money-conscious family. I considered myself “good with money” for most of my life. While my brothers would rush to spend every cent of the tenner an aunt or uncle squeezed into our hands, I would squirrel mine away — a point of pride for my parents.
But something happened when I moved out of my rural abode and into my first college apartment. Suddenly, daily takeaway coffees became a thing, as did weekend brunches, and the freedom to go out on the town whenever I pleased. A massive TK Maxx was as close as my local Costa, and I visited it about as regularly as that coffee chain.
Suffice to say, it wasn’t long before my good money habits were replaced by a "treat yourself" mantra that has persisted to this day. And, unfortunately, Covid-19 has only served to cement this notion.
But while college life has a certain entrenchment with being broke, it’s not as quaint in one’s mid-twenties. And with the current cost of living crisis seeing my food shop, energy bills and rent hitting new highs, I no longer have the luxury of being able to neglect a budget.
So, I finally set aside some time to build my first budget, and enlisted the help of Cork financial advisor, Carol Brick, and a financial planner by Irish company The Head Plan, to help me on my way. Here’s how I built my first budget.
You need to know where you are, to figure out where you’re headed, and if my financial statements were anything to go by, I was not headed for financial wellbeing.
The first step in my shiny new financial journal asked me to look back on my finances over the past three to six months and look at my day-to-day spending on the granular level. This involved a fine amount of scrolling down on both my Bank of Ireland and Revolut apps, and a fair amount of self-shaming when I saw just how much I was spending on eating out, in particular. I also noticed, as a non-driver, I was spending a fair bit on public transport (not too bad) and taxi’s (very, very expensive).
You might remember this from Junior Cert Business. Also known as ‘take-home pay,’ this is the salary you are paid each month, minus tax and monthly commitments such as pension or trade union contributions.
“This should include everything,” financial advisor and director of HerMoney.ie, Carol Brick says. Part-time work, side hustles and overtime should all be included here, so this figure may differ month-to-month.
The non-negotiable payments go out of your account every day. For me, the biggest one of these is my Dublin rent, followed by my grocery and energy bills. Other monthly necessities might include prescriptions, phone bills, subscriptions, money for petrol, and loan repayments.
“If any of these costs vary, we would advise you to determine the average cost over the past three months,” Carol says.
Everyone wants to have a hefty savings account, or a discretionary income big enough to sustain our luxury shopping habit and weekly takeout, but when it comes to budgeting, the biggest financial mistake people make is setting unrealistic parameters, Carol says.
This could mean underestimating how much you need to spend on groceries every month, or putting all the money that’s leftover after fixed costs in to your savings account — leaving you with nothing for discretionary spending.
“Be realistic, and give yourself some leeway, “ Carol advises. Afterall, if you’re too harsh with your budget, you won’t stick to it.
When it comes to setting long-term goals, like saving for a house deposit or a car, Carol suggests being as specific as possible about how the amount of money you will need, the timeframe in which you want to save this amount, and how you plan to do it.
"If the goals aren't clear, then you're never going to reach them because you don't know where you're going.
“The more specific the goal is, the more successful the budget will be,” she promises.
For me, my immediate goal is simply spending less money, but saving up for driving lessons and eventually buying a car is also on my not-too-distant to-do list, so I decided to start planning toward this goal now to give me some clear motivation with my savings account.
One aspect of The Head Plan’s financial budget is ‘seasonal splurging.’ We all need to treat ourselves sometimes, and if we put aside a set amount of money to do this every so often, we are more likely to stay within comfortable spending boundaries, rather than tapping away carelessly.
On my splurge list, I’ve included a winter-sun holiday with girl friends, Apple airpods and a trip to the spa. Knowing I’ve earned that money will mean I can enjoy all of these things guilt-free when the time comes.
Co-founder of The Head Plan, Denise Kenny Byrne’s mantra is, write it down, make it happen. When it comes to budgeting, tracking is key. I’ve been tracking my daily spending for just over two weeks now, and I’ve already shocked myself at how much was going on unnecessary chicken roll lunches. Now that I am keeping an eye daily on my bank account and writing down everything I spend, I feel certain that I will waste less money on unnecessary items, and ultimately have a healthier relationship with money. And if I spend less than I budgeted, well that’s just an extra reason to smile.
- If you need help planning your budget, advice is available. Contact a local financial advisor such as Her Money or visit MABS.ie