Clever Budget Planning for People in their 20’s

Budgeting in your 20's

You’ve finished school, you’ve made plans to move out of your parents’ house, and you’ve started a career and are getting paid. Maybe not as much as you’d like, and maybe not as much as some of your friends are making, but you’re finally starting to see some cash roll in.

You’re at the start of your life as an adult, and you’re finally in control of your money.
It’s been said that “a beginning is a very delicate time,” and the beginning of your financial life is no different: your wealth in your 30s and 40s will be largely determined by the financial decisions make right after college.

The pressure is on for you to make decisions that will ensure your security and independence later in life.

Read on find out how to lay the foundation for financial independence, how your social life affects your personal savings, and how you could enter your thirties with a fair bit of wealth and equity under your belt.

If Possible, Live at Home and Build Up a Nest Egg

Of all the monthly bills you’ll have, putting a roof over your head will probably take the biggest bite out of your paycheck — the average person spends about a third of his or her income on housing.

So how can you make your housing costs benefit you? Your best bet is to live at home for a while.

After the freedom of college and the independence of living in student or residential housing, the idea of living with Mom and Pop seems… kind of awful, really!
But other than tent-living or apartment-squatting, you’ll never have it better as a tenant: your parents may ask for a couple hundred dollars in rent every month, but that rent usually comes with a fully-furnished house, paid utilities and stocked cabinets.

Parents may make tough roommates, but over a few months you’ll be able to save a couple thousand dollars and get your own place… right?

Find Some (Good) Roommates

Right on the saving, wrong on getting your own place!

Paying full-price for housing can be a paycheck-killer. One-bedroom apartments in any major city are a major expense — usually starting around R1, 000 a month — and that can be brutal for someone just out of school.

If you make between R40, 000 and R50, 000, that rent would be about half of your monthly paycheck. Having privacy is nice; having money is nicer.

If you’re moving to an area where you know people, make some calls and find out if any of your old friends are looking for housing.

If you’re moving to an area where you don’t know a soul, hit up Craigslist and start looking — but be very, very selective. It’s better to wait a month or two and find an ideal roommate than to spend a year-long lease with a maniac. If you’re the “in bed early” type, a roommate with a band may be a bad idea for you.

As for what neighborhood to live in, here’s my favorite strategy for finding great rent prices: avoid the hip neighborhoods. If there are nice restaurants, art galleries, and realtors on every block, it’s too late — that neighborhood has moved north of your price range.

Instead, look for the telltale signs of up-and-coming neighborhoods. Look for a growing artist community (starving artists usually know how to stretch a dollar until it’s thinner than a thread, and they usually find great places to live); a few new, but highly rated, restaurants (less than two years old) that people in your city’s Time Out magazine are mentioning; and 99-cent stores on the neighborhood’s main strip (these often signify that families live in the neighborhood and that it’s generally safe).

If you can find those three factors, you may have found the next hot spot, and you can find a cheap-but-charming apartment for a great price.

Manage Your Entertainment Budget

When people are trying to tweak their budgets so that they can save more, they tend to look at items on the spreadsheet — housing, car payments, food, entertainment — and figure out how to spend less on that particular line item.
What most people forget is that those line items are the effect, and not the cause. When you want to change your spending habits, you need to consider what is motivating you to spend that money.


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