A budget is a plan for how you will spend, save, invest, or donate the money you make. As adults, we know that budgets can make or break our financial security, especially when we aren’t making much money or when we have significant amounts of debt to pay. If you are an adult looking for a budgeting tool, there are many to choose from, but arguable budgeting comes down to four things: your income, your saving and investing, your spending, and your charitable giving. 

The below expounds on those simple topics in a way that I hope is digestible for all. 

Dear Ney Ney,

Today it’s time to learn about budgeting. A budget is a plan for what to do with your money. It is a good idea to have a plan so that when you get money as a present or earn it, you know what to do with it.

The first step when making a budget is to think about what you want to accomplish with your money. Maybe your goal is to buy a bike. Maybe your goal is to buy food for a daily whose parents lost their job. Maybe you want to buy a computer so you can start a graphic design business. Remember, money is just a tool to do other things, or energy you can direct towards another goal. It doesn’t matter what your goals are, what matters is that you think about what is important to you, and how money can help you accomplish what is important to you.

Goals. Check.

The next step is to review how much money you plan to get, how often you will get it, and what is the source of the money. While you are young you might receive an allowance, which is money given to you by your parents, usually for helping them by doing chores. You might get money as a gift on holidays or for your birthday. As you get older, you might also get a part-time job. 

Income. Check.

The next step is to decide what to do with the money we get or earn. Most adults plan their budget based on a month, because they either get paid every two weeks, twice a month, or once a month, and most bills, like rent and electricity, come one time per month. 

When you get or earn money there are four things you can do with it: spend it on things you need or want, save it in a bank to use later, invest it to make more money, or give it away to other people or organizations that need it. So, how do we decide what to do?

Many adults think about paying bills, or spending, first because if adults don’t pay their bills then they won’t have a place to live or food to eat. A better way as an adult is to decide how much you want to save, invest, and give away, and then decide what to buy and where to live based on how much money you have left each month. 

For now, Easiest budget that you can have is to evenly divide any money that you earn or get between saving giving investing can spend. That means if you get $20 for your birthday, you give $5 to charity, put $5 in savings, invest $5, and then spend $5. 

Budget, check.

Now that we have goals, understand how much money we will get or earn, and have a plan, or a budget, for our money, the next question is how do we actually give, save, invest, and spend?

Giving away money is easy, you can just give it to someone that you think needs it, or asks for it. Giving money to those in need us called charity, and there are organizations called charities that accept money as gifts and then use the money to help people in need. The hardest part about giving away money is deciding how you want to help people. For example, you might want to help other kids buy school supplies, or toys, or help parents buy food for their families. 

Saving money is the easiest of the four options task to do of the four. All you need is a jar, an envelope, or a piggy bank. Pick one, put the money you want to save inside it, and keep it in a safe place. Another option is to put your savings in a savings account at a bank. 

Investing is when you use your money earn more money. When you invest, you buy something called an asset. An asset is something that most people think will increase in value, or be worth more money, in the future. An asset also pays you money while you own it. There are many different assets, but two common assets are shares of stock in large companies or rental property, like houses and apartment buildings.

Spending can be fun, and it can be tough. It can be hard to decide what to buy, there are so many new and fun things being built each day! You might find that what you want costs more than the money that you have to spend, so you might decide to save money until you have enough saved up to buy what it is that you want. 

The better you understand how to budget, and the better you are at following your plan, the happier you will be in the future. I’m excited to help you stick to your budget.

I love you.