The Basics of Banking: Part 2

Budgeting. For many people, just saying the word is stressful. How do you make a budget? How do you follow one? Budgeting can be difficult for young people whose monthly incomes often vary, but knowing how budgets work is critical for developing healthy financial habits.

Budgeting is not about constantly saying “no” every time you want to buy something. Rather, it's about understanding your finances – tracking your spending, setting savings goals, and achieving them. Your budget ensures you always have enough on-hand for the things you need while setting aside a little extra for the things you want. Following a budget can keep you out of debt, and it can help get you out of existing debt.

There are numerous ways to create a basic budget, but the best advice is to begin with the money you have. List everything you might have in a bank account or saved from birthdays, holidays, or other special occasions. List any regular income from an allowance or after-school jobs.

Next, list all your expenses – everything you buy each month. Include food, entertainment, clothes, school supplies or club dues, and any bills you’re responsible for paying. Total the items on each list. This will give you an idea of how much money you have coming in and going out.

Now go back to the list of expenses and prioritize them. Which items must be paid each month and which are not necessarily required? Subtract the required items from your income to see how much is left.

This number helps determine how much you have left over to spend on fun activities. It also helps when deciding how much you want to put aside in savings each month.

Once you’ve established your budget, it’s important to stick with it. Keep a list in a notebook or on your phone, or create a simple spreadsheet, and spend a few minutes each month updating your income, spending, and savings. You can also use Origin’s free financial management tool built into our online banking and mobile app to help you track budget progress automatically.

It’s never too early to build good money management skills. With a solid foundation, kids and young adults can develop the knowledge and habits that help them become independent adults and avoid common financial mistakes.

Next, we’ll discuss opening your own checking and savings accounts.