My favorite day is pay day and I get so excited to see money flowing into my bank account; however, I can’t get too excited. Before you go spending your money you need to file away your money into different saving and spending accounts so you can have money for the future. There is a simple rule that I wish I had known about when I first started working. It’s called the 50:30:20 budget and super easy to remember.
Everyone’s bank account is organized differently, but usually have the same idea. Usually there is a spending, reserve, and growth/savings . Reserve your spending for fun money that you get to spend with your friends, so you can prevent overspending. Your reserve is actually used to save money for necessities, which are usually limited at such a young age. Things that you may spend your reserve money on are things like gas, but since as a teen your expenses are low. I like to use my reserve for emergency money while I am in college and not working. I use it as if I am my own mini employer. Every few weeks I’ll transfer about $50 over to spending from my reserve, while I am in college. I only advise to do this if you do not have many necessities and you are in a pinch while at college. Your growth/savings account is obviously where you put the money you do not touch (kind of). This is the money that you use to invest in stock or even a retirement savings account (it’s never too early!). I chose to put a chunk of my savings into the stock market and I will eventually open up a retirement account.
The 50:30:20 rule applies to every paycheck you receive. 50% of your paycheck goes to necessities, your reserve. 30% is your fun money, your spending. The last 20% goes straight to your savings account and whichever way you choose to invest it. Easy Peasy!!