Creating a monthly budget can help you take control of your financial future. A budget can help you better understand your monthly spending habits, based on how much you earn each month. Creating a budget doesn’t have to feel overwhelming. In this article, we’ll share a few simple, practical tips to create a budget and stick to it to help you achieve short-term and long-term financial goals.
What is budgeting?
Budgeting involves creating a financial plan that helps you keep track of your money over a set period of time. It helps you map out how much you earn each month, how much you spend on necessities, and how much goes to savings or other purchases. Keeping track of where your money goes and prioritizing necessities like rent, food, and bills can help you better control your spending on other purchases – and also help you save for the future.
This approach to money management supports your overall goals and builds long-term stability. Developing good budgeting habits can mean less stress over money, more control over spending, and the breathing room to enjoy life. You’ll also create a clear path for reaching milestones like paying off debt, saving up for a home, or taking a well-earned vacation that fits your budget.
Why budgeting matters & how does it work
Budgeting can help you become more financially stable. A budget is a decision-making tool that can help you to manage your money by mapping out your income versus your monthly expenses. This can help you make informed financial decisions around spending and saving, giving you power to plan, prioritize, and achieve financial independence.
We're here to make budgeting advice for young adults simple and attainable. Start with budgeting basics and build confidence as you go so you can:
- Control your spending and cut back on impulse purchases.
- Save for the future to afford a home, education, or retirement.
- Avoid debt by allocating money for all your needs.
- Reduce financial stress and live with fewer uncertainties.
- Be prepared for emergencies without wrecking your finances.
Budgeting doesn't require any expensive software or complicated math. You just need to calculate how much money is coming in, track how it’s being spent, create a plan, and adjust it regularly. This is especially important for young adults looking to reach short-term goals, like paying off a credit card, or long-term goals, like buying a home or launching a business.
How to create your first budget
Budgeting doesn't mean giving up the things you enjoy. It’s about prioritizing financial responsibilities and reaching goals. We’ve broken it down into eight simple steps to help create a budget and save money while occasionally treating yourself guilt-free.
1. Set your financial goals
Setting financial goals gives your budgeting a purpose, shapes the rest of your plan, and helps you make smarter spending trade-offs. Make sure your goals are descriptive, realistic, measurable, and have a deadline. Start with identifying short-term goals you'd like to accomplish because they’re easier to visualize. Common short-term goals for young adults include:
- Make regular, monthly payments toward your student loans or car loan.
- Paying off high-interest credit card debt.
- Putting aside $100 a month.
- Cutting entertainment costs by 25%.
- Building a starter emergency fund (typically around $500 to $1000).
With a list of clear, achievable short-term goals in place, it will be easier to envision long-term goals that align with your priorities. Golden 1 can help you save and score a few quick wins with a beginner-friendly savings account or a student checking account for members up to age 24. As you stay consistent with your smaller goals and build confidence, the bigger milestones will feel more attainable and within reach. Typical long-term goals for young adults include:
- Paying off student loans.
- Starting early retirement savings.
- Investing in stocks, bonds, or mutual funds.
- Building a more robust emergency fund (3–6 months of expenses).
2. Know your net income
Your net income is your "take-home pay" after subtracting taxes, retirement contributions, and other payroll deductions from your gross income. This is the total amount that you'll receive each pay period via check or direct deposit. Please note that if you're a contractor, freelancer, or gig worker, you'll have to track your own taxes, set money aside for them, and account for other business expenses when calculating your true take-home pay.
3. Track your spending
Make a detailed list of everything you spend money on. And we mean everything. Record every utility bill, streaming subscription, grocery run, and coffee you order for several weeks. This can help you spot areas where you can cut back. You can track spending with an app, a budgeting spreadsheet, or just a pen and paper.
Once you've gathered about four weeks of your spending data, categorize each expense into either fixed or variable.
- Fixed expenses are those that you pay regularly, like rent, insurance, and loan payments.
- Variable expenses are more flexible and include dining out, entertainment, and shopping.
When you review your list, you can see which areas take up the biggest share of your income and make informed decisions about where to adjust. This will also help you find and eliminate invisible expenses that drain your budget, like forgotten subscriptions, unused gym memberships, excessive food delivery fees, and in-app purchases.
4. Set realistic spending limits
When setting your spending limits, include your must-haves and your nice-to-haves. Start with your fixed essentials, then decide which variables (vacations, dining out, hobbies) fit without breaking the bank. Leaving reasonable room for things you enjoy reduces frustration and makes it far more likely you’ll stick with your budget long-term.
5. Create a budget plan
With your income, expenses, and spending limits in hand, you can pull it all together into a clear plan. Keep your budget simple and list your monthly income, fixed costs, variable expenses, and savings goals. Assign a dollar amount to each category so you know where your money is going.
A monthly budget plan should be easy to scan and understand at a glance. We'll use the zero-based budgeting method as an example. Start with your total take-home pay at the top, followed by categories for fixed expenses, savings, and variable expenses (groceries, shopping, dining out). At the bottom, your total monthly expenses should match your take-home pay so every dollar has a job.
Sample monthly budget (zero-based method)
| Category | Item | Amount |
|---|---|---|
| Take-Home Pay | $2,650 | |
| Fixed Expenses | Rent | $1,200 |
| Utilities | $150 | |
| Car Insurance | $120 | |
| Phone | $60 | |
| Subtotal |
$1,530 |
|
| Savings & Goals | Emergency Fund | $200 |
| Roth IRA Contribution | $150 | |
| Subtotal | $350 | |
| Variable Expenses | Groceries | $300 |
| Miscellaneous | $150 | |
| Dining Out | $120 | |
| Shopping & Hobbies | $100 | |
| Travel Fund | $100 | |
| Subtotal | $770 | |
| Total | $2,650 | |
6. Choose a budgeting method
There's more than one way to manage your budget. Each budgeting approach has its own strengths, but the best one is the one you'll actually use. Test-drive the methods below to see which clicks with you and your workflow.
Zero-based budget
Good for: No-nonsense recordkeepers who want to put every single dollar to work.
How it works: At the start of each month, take your net income and make sure every dollar is assigned to a specific expense, savings goal, need, want, or debt payment. The goal is to have every dollar allocated so if, for example, you have $4,500 coming in, you'll have $4,500 going out.
Envelope budget
Good for: Spenders who need physical limits to keep themselves in check.
How it works: Every month, you divide your cash into labeled envelopes (or digital categories) with the amount you've budgeted for each category. You'll stop spending for that category when the envelope is empty.
50/30/20 budget
Good for: Big-picture thinkers who like big spending buckets instead of detailed tracking.
How it works: Each month, you'll separate your cash outflow into three categories:
- 50% for needs
- 30% for wants
- 20% for savings
This method requires carefully defined categories so that a want, such as a daily latte, doesn't get grouped under food and groceries, a need.
Pay-yourself first budget
Good for: Savers who put away money first and don't worry about too many details after that.
How it works: Before you touch any money to pay bills or spend, a set percentage (typically 20%) goes right into savings or investments. The rest covers your expenses at your discretion.
Budgeting software
Good for: App lovers who want automation.
How it works: Online tools like Mint or YNAB link to your credit cards and bank accounts to track your spending, categorize transactions, track goals, and send alerts when you're in danger of overspending.
7. Track spending & adjust your budget
Because life is full of ups and downs, treat your budget like a living document. Some months will bring unexpected expenses or higher costs in certain categories. Tracking your spending helps you catch “lifestyle creep” which is the slow, sneaky habit of spending a little more each month on things like one-too-many DoorDash orders or an extra online shopping spree.
If you notice you're overspending, look for ways to cut back. Limit dining out to once a week or swap one paid subscription for a free alternative. If your variable expenses are already tight, check your fixed expenses for chances to save. Compare insurance rates, refinance your car loan, or negotiate lower utility bills. Small adjustments can free up cash for your goals without feeling like a sacrifice.
8. Review your budget regularly
Check in with your budget every month to make sure your spending is on track. Adjust for changes like a raise, new bills, rent hikes, or major life events. Regular reviews keep lifestyle inflation in check and give you more freedom to spend on what matters most without derailing your long-term goals.
Budgeting tips for young adults
Successfully managing your money doesn't stop with just building the budget. You have to be diligent and follow through month after month. We recommend following these strategies to help you stick with it and make steady progress towards your goals:
- Automate savings and bill payments: Set up direct deposits or automatic transfers so your savings and bills happen without having to think about it.
- Regularly review your subscriptions: Cancel or pause services you don't use and check your statements to see if you're paying for any you forgot about.
- Find an accountability partner: Share budget goals with a friend or family member who will check in and keep you on track.
- Track progress visually: Use charts, apps, or a simple spreadsheet to see your savings or debt payoff grow over time.
- Avoid financial FOMO: Don't worry about what friends or influencers are spending money on. Your budget is about your priorities, not online validation.
- Celebrate your wins: Reward yourself when you hit milestones, big or small, to get that dopamine hit and stay motivated.
Budgeting tools to get you started
Ready to start budgeting without all the stress? Stop wondering where your money goes and start spending with confidence. Our free Budgeting Worksheet makes it simple to create a practical budget for young adults that you'll actually use. Download it now and take control of your finances before next payday.
