POCKET CHANGE Tutorial

I'm a teenager, what can a budget do for me?

Test Your Budgeting Skills

To begin this exercise, estimate how much income you think you will earn on a weekly basis.

If you do not currently earn income, check the box and we will use $100 for purposes of this exercise.

"Spend less than you earn"
is a great motto to live by when developing your budget.

Think about how much you should budget in the following areas per week.

Before we decide on any amounts, let's look at a few considerations in the next couple steps of this exercise.

How do you prioritize your spending? Number the following categories (1,2,3,etc.) from most important to least important. This exercise should guide your thinking about how you are going to spend your money.

Do you have a long-term goal for making a big purchase?

When do you plan to make this big purchase?

To save for $, you will need to save about
$  per month, which is about
$  per week.
Now, include this amount in your budget on the next page!

Keeping the previous considerations in mind, fill out your budget for one week based on your income or $100, if you do not earn income.

Wow, if you saved $X per week you would save $  per year!

Now that you have completed your budget, take a look at the recommended percentages for the following categories:

If you are saving 15%, you would save about $0 by the end of the year! Hopefully this is encouraging!

Did you remember the budgeting motto?

"Spend less than you earn."

Let's see how you did.

Have you ever heard of envelope budgeting? It's a concept promoted by Dave Ramsey, a personal finance guru. Don't worry, it's not complicated.

Envelope budgeting is when you take your paycheck each week and set aside portions of your income in envelopes designated for specific categories.

One envelope is used for each category of spending.
Transportation/Gas
Entertainment
Savings
Fast food/Snacks
Clothing
Giving
Cell phone

How do you know how much to set aside in a certain envelope?  These amounts will come from your budget.

You can use this system for as many or as few categories as you like. Now that you have figured out a good budget for yourself, consider using the envelope system to help put your budgeting into action.

What envelopes do I need?

Source:
www.daveramsey.com

What envelopes do I need?

If you think this system would help you stick to your budget, start with one category in your budget, for example, entertainment. Typically, entertainment is considered discretionary spending, but often consumes a high percentage of a teenager's income. If you'd like to use more, or even one for each category in your budget, that would be great!

Saving for College?

If you decide to utilize envelope budgeting for more than one category of your budget, consider your college fund or general savings. This is a great way to set aside money for your big purchases. As you become accustomed to saving money each week, it may be best to put your savings in a bank account instead of an envelope. Why?  You want to keep it safe and earn some interest. You don't have a bank account? Have your parents take you to the bank so you can open one!

Click next to learn more about Envelope Budgeting.

Where do I start?

1. Get an envelope for each category you have chosen.
2. Label each envelope with the category and percentage (or dollar amount) you plan to allocate each week or payday. For example, "Entertainment 25%."
3. If you have budgeted 25% of your paycheck for entertainment, you will put 25% of your money each payday in your envelope. Remember, you should only use this money for entertainment.
4. Keep your entertainment envelope in your handbag or wallet so you have it when you are out with your friends!
5. Once you use all the money in the entertainment envelope, you cannot spend any more on entertainment until you receive your next paycheck.
6. When you get your next paycheck, set aside the same percentage (or dollar amount) in your envelope labeled entertainment. You won't have to look back at your budget because the percentage or dollar amount is already written on your envelope.

Sound complicated? It is an easy concept, but it may be difficult at first to limit your spending! If you realize that your percentage is completely unrealistic after a few weeks, you may need to adjust your percentage. Be diligent, you can really start to save money by using the envelope budgeting system.

Would you prefer an online budgeting tool? You may want to do a little research to see what tool would work for you. Consider www.mint.com or the EZ budget app, both are free!

Don't buy it!

Do you have a hard time restraining yourself from spending at the store? Be aware of some of the common methods stores or advertisers use encouraging you to buy their products.

• Do you buy something because it comes in fancy packaging?
• When you are in the checkout line at a store, are you tempted by the various "cheap" things for sale on the shelves next to you in line?
• Do you buy something just because it says "new and improved"?
• Do you justify spending over your budget because a product is 20% off?
• Do you notice when a product looks a bit smaller than it used to be but is still the same price?

Be aware of the tricks that advertisers use to convince you to buy from their store. If you can identify them when you are shopping, you can avoid falling into their traps! Don't be fooled!

Getting $mart Tips

Remember these tips when you are budgeting:

1. Prioritize your spending when you are creating your budget.
2. Consider your long-term goals and start saving for them now. Make sure you do your research in determining the cost of big purchases, such as a car. You will be well prepared when the time comes to make your big purchases. You don't want any surprises!
3. Keep a notebook with you in your car, backpack, or handbag. Track the money you are spending throughout the month. This will help you begin determining what categories you will need in your budget and ideas of how much money you spend in these areas.
4. Be realistic! You may not be able to budget all the money you would like to on clothing or entertainment.
5. Take charge of your spending! It is a difficult task, but you CAN control yourself to spend within your budget. Take the initiative to use the envelope budgeting system to control your spending so you can attain your long-term goals. Don't be discouraged, in just a few weeks you'll be a pro!