For a lot of younger people, having a job in college is the first time a real and regular income is experienced. Some wait tables, tutor other students, or maybe even babysit. Regardless of what you're doing, some of us don't know how to organize all the money we're bringing home. For myself, I use a five element budget that I covers all my basic spending and saving needs. I put a certain percentage of my income into each element.
Firstly, I have a classic spending component. Into my spending segment, i pour 25% of my income. I use my spending portion of my income to pay for things that I want. This includes things like clothes, food, and any social outings I want to go to. Having a set amount that I can spend on myself allows me to really decipher which things I want to do, and limits the amount of pointless spending that I can do.
Secondly, I have a long term savings account. I put 25% of my income into my long term savings. I do not touch this piece of my budget, unless it is for emergencies. The point of a long term savings account is to build it over the part of your life when you plan on having an income. This allows you to have a substantial amount of money when you retire or whenever you choose to stop putting money away and spend more.
Thirdly, I have a debt portion of my budget. I save 30% of my income to pay off debts in the foreseeable future. For some people who don't have these debts, this portion does not make much sense. For myself, I have to pay certain amounts to cover part of my college tuition each year. This annual amount is small enough to be covered my a portion of my salary that I make working in a restaurant, so I put some of my income away just for the purpose of paying this debt. In summation, I do not touch this segment of my income unless I am making a payment on my tuition.
Fourth, I have a gas portion. I tend to drive a lot, and so I put 10% of my income away just to pay for gas. I do not go into this element of my savings unless I am filling my tank.
Finally, I have a portion of my savings that I use to pay for all car related requirements. As I said, I tend to drive a lot. I live very close to New York City, and so when I go somewhere I usually have to pay a toll. This fund is where I get the money to do so. For people that do not drive as often as I do, this might not make sense. However, everyone who has a car should have a car fund, because no matter how careful of a driver someone is, or how safe of a car someone drives, it will break down eventually, and money will have to be put into it.
