How to Create a Livable Budget: For Teenagers

In today's tough economic times a lot of you are looking for a way to stay in control of your money. Many of you have been forced to live on a strict budget. Living tightly is a difficult, but sometimes necessary, experience that even teens go through, especially these days. And sometimes you aren't short on cash, but you want to keep and eye on things to insure it stays that way. And some of you may wonder exactly how much money you actually have to spend. Those, and many others, are all great reasons to develop a good budget.

When many people think of a budget, they think of a time-consuming and complex beast which is both hard to create and difficult and painful to live on. When in reality it isn't that hard to make and can save both time and money in the long run. Plus it's perfectly possible to be happy while on a budget; it's all about designing a good one. You simply have to break it down into manageable, effective steps.

This article was written with teenagers in mind but could be used by anyone who is currently in a situation in which they don't pay for things such as the majority of their groceries, car payments, mortgage payments, gas and electric bills, etc., nor is earning a significant salary. Of course if you do pay for some or all of these things you can still use this plan, you'll just add a few more expenses than this article mentions.

Traditional budget worksheets can be borderline useless for people in this aforementioned situation as most things listed in the budget they don't spend money on, and the things they do are summarized into a single category "Misc.," or perhaps "Entertainment." So this only leaves making a personalized budget.

Getting Started:

If this all sounds like you then the first thing you need to do is come up with a list of things you spend money on, your "expenses." Also, make a list of your sources of income. Some examples are such:

Expenses

Movies, Music, Video Games, Electronics (e.g. Game Consoles, MP3 players), Books, Hobby Supplies, Eating Out/Coffee (e.g. groceries you do pay for), Tickets/Admission Fees (e.g. Movie Tickets, Bowling, Skating Rink), Party Supplies, Gifts, Car/Motorcycle Expenses (e.g. gas, repairs, any payments), Cell Phone bills, Credit Card Bills, School Expenses (e.g. textbooks, notebooks, pencils, etc.), Subscriptions (e.g. Magazines, Computer Games, Music Services, etc.), Clothes, Make-Up, Accessories, Personal Care (shampoo, soap, toothbrush, etc.), Pet Supplies, etc.

Income

Allowance, Job, Gifts, etc.

The next step is to figure out how much you usually spend on all these things monthly. It's fine if you can't remember the exact numbers, as you can simply adjust your budget as you go if you find yourself spending more or less on something than you expected. Include any money that you wish to keep as a savings for emergencies or large purchases in this. Once you have some approximations, sum them up. This is your monthly expenditure. Save this number for later.

Now figure out how much money you earn on a monthly basis. This includes every source of income you have. If you always get a certain amount of money from relatives for your birthday, you can either divide that by 12 and add it to your monthly income, or you can choose not to include it and call it extra money when you get it. If you regularly do chores or have a part time job in the summer, once again you can either divide it among the months or save it for extra money or as a savings for large purchases. Of course you cannot spend this money before you get it, so it's a good idea to make a tighter budget not including it at first, and then as you get these additional income sources, make a larger budget including the new found money. Add all these incomes up. This is your monthly income.

Compare your monthly income to your monthly expenditure. If you have more income then expenses then you have extra money with which to buy more things, or put in savings for later. If you spend more money than you make, then you need to cut back on some of your spending. This can be tricky as deciding what should go and what should go stay can be very difficult. This is usually the part of budgeting that everyone hates. But it's very important, as living outside your means only leads to debt. On a positive note, once you adjust your budget so that your income matches your expenditure, you won't ever have the unpleasant experience of wanting to do something, only to learn you just can't afford it. With a well thought out budget, you can spend less on things not as important to you, so that later you can have the money for something you really want.

Take your list of expenses and rank them in importance. For instance, if you could live without ever buying another video game again but would suffer emotional problems if you couldn't buy your favorite band's new release, rank music above video games. Rank things such as credit card and cell phone bills and other things that must be paid in full at the top. Some things you may find you can eliminate entirely, such as if you'd been meaning to kick the gum habit anyways, or if you no longer read a magazine subscription.

Now that you have your expenditures ranked, adjust the amount of money that will be spent on them monthly based upon the ranking. This is probably the most difficult part of making a budget. Try to keep in mind that you'll have to live off of this budget. So as tempting as it is to cut entertainment that you think you should be able to live without, we are human, and sometimes we need our simple pleasures. However, the less money you spend on things you really don't care about, the more you have to spend on things you do care about. Keep fudging with the numbers until your expenses match your income.

Make the Worksheet:

Now, select a medium you are comfortable making a budget worksheet on. It doesn't matter whether it's pen and paper, Microsoft Excel, or some other program, just so long as you can make columns and rows on it. Label the top of your document with the current year and month. You'll make a new page for each month so as to keep everything separate and organized.

Label the first column "Income." Label the rows below with your sources of income. Put some space between them and the next few rows. Put a title "Expenses." Below this, list all of your expenses. (When dealing with expenses that are not monthly, such as semi-annual or bi-monthly payments, you'll have a category that's a "payment savings," that purposefully sets aside enough money each month for the payments.) Label the second column "Amount." Leave the rest of this column blank, as it's where you'll be putting the amount of money you spent on each category during the month. Label the next column "Budget." Write in each row below it the amount you decided upon earlier can be spent on each expense. On the income rows, write how much income is expected. You now have a simple budget worksheet.

For added convenience, you can label one more column "Difference." And at the end of each month you can subtract your "Amount" from your "Budget" and write that into its row under "Difference." If it's negative, you spent more money than you had. If it's positive you have extra money left over. Subtract in the reverse order for the income (subtract "Budget" from your "Amount") to see if you have extra or less money earned than expected.

For each new month, make a duplicate of the worksheet you just made, except label it with the new month, and add your difference from the previous month to your new "Budget." Basically, if you spent too much on something last month, spend less this month to get back on track. If you have extra, you can spend more. However if you find yourself regularly spending more on some things, and less on others, than you initially expected, simply fudge the numbers around until the budgeted amount matches your actual spending habits better. Remember: this is your budget, and it should suit you.

At the end of a year, you can write up or type up a page similar to your monthly worksheet, only summing up all your expenses and income, actual and budgeted, so you can see how you did on an annual view, and then adjust your budget accordingly. The important thing to remember with a budget is to make it so that you can live on it without being incredibly miserable. It's something that can keep changing as you change. You do not have to live by the spending habits you had two years ago.

I hope this advice has helped you come up with a personalized budget for yourself, and makes your future spending and planning easier and less stressful.