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How to Save When You’re Young and Starting Out

Key Takeaways

  • Learn your savings potential by subtracting all monthly bills and everyday expenses from your net monthly income.
  • Organize your money into separate accounts for bills, everyday expenses, emergency funds, and individual savings goals.
  • Set up automatic transfers from each paycheck so saving is prebuilt into your budget.

A lot of young people are giving savings the cold shoulder. About 61% of folks ages 25 to 34 have less than $1,000 saved. Another 67% of 18- to 24-year-olds are in the same boat.

Student debt is certainly a factor, but there’s bound to be some room in the budget for saving. Really, it comes down to accounting for every dollar coming in and out.

What if you could set up a system that has a separate account for everyday expenses (groceries, gas, weekend activities), another for bills, and individual savings accounts for each goal? Every paycheck could automatically transfer the appropriate amount of money to each account. 

This gives every dollar a purpose. Like when you're filling up your car at the gas station, you'll know to pay for it through your everyday expenses account. When rent is due, the money is waiting for you in your bills account. 

Your system could look something like this:

Nope, it’s not rocket science. It’s something you can set up today to reduce the stress of managing your finances.

Let’s get started.

Step 1: Figure out your net monthly income

Add up all your paychecks from the past month. That’s how much money you’ll have to work with each month — assuming your income doesn’t vary — to cover all everyday expenses, bills, and savings.

Step 2: Add up everyday expenses

How much do you spend each month on recurring everyday expenses? The price tags on these purchases can vary week to week, month to month,  so they’re harder to predict. But by looking back at previous months, you can get a general idea on how much you tend to spend on these recurring expenses. Then, you can set your budgeting goals accordingly. Log them as seen below:

Step 3: Tally up your bills

Most bills — rent/mortgage, student loans, car payment, cable, Internet, insurance, gym memberships — cost the same every month. Therefore, they’re easier to account for. Add all your monthly bills together.

Step 4: Calculate your savings potential

OK, time to put it all together. Take your net monthly income and subtract your everyday expenses and bills from that number. What’s left over? The money you can save each month, A.K.A. your savings potential.

Step 5: Choose your savings goals

Now that you know your savings potential, distribute those funds amongst all your goals.

But first, what are those goals? What are you saving for? List out your savings goals so you can figure out how much to distribute to each one. They could look something like this:

You’ll open a savings account for each goal.

Step 6: Divvy up savings potential to your goals

How much do you want to save monthly for each goal? Distribute your savings potential across all goals. Prioritize accordingly — you might want to save more for one goal if you need to reach it sooner or if it’s more expensive.

Now your savings graph should be filled up!

Step 7: Set up your automatic transfers

Last step! Now that you have separate accounts for each goal, set up the automatic transfers from each paycheck to cover each month’s totals. So if you get paid bi-weekly, that means you’ll usually have two paychecks each month to cover all everyday expenses, bills, and savings.

So your automatic transfers could look like this:

What to remember

Even the best plans need to be revisited every so often. The same goes for your savings plan. Over time, things change — your income, priorities, or perhaps you’ve added (or completed) another savings goal. Check your plan on a recurring basis to make any necessary changes to keep your plan up to date.

Warning: You might feel broke in the early going; that’s normal. You’ll feel much better about your money management a few months in. Plus, practicing these saving habits today can set you up for the rest of your life.

More information

Need some help fitting saving into your budget? Come in for a Citizens Checkup at your nearest Citizens Bank branch.

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