Budgeting for Young Adults: 10 Tips for Saving Money in 2024

Saving money doesn't have to be difficult for young adults. Learn how to budget effectively with these 10 tips to help you reach your financial goals!

Financial literacy is an essential skill that young adults should learn as early as possible. Understanding how money works and how to manage it effectively can set the foundation for a secure financial future. As a young adult, managing your finances can be a challenging task. With expenses like rent, groceries, student loans and social activities, it can be easy to overspend and find yourself in a financial bind. However, with the right budgeting strategies, you can set yourself up for financial success in the years to come.

There's no better time to start investing than when you're young, as wealth compounds with time. Small amounts invested for the long term in your 20s and 30s could lead to millions by retirement. Below, you'll find some of the best budgeting tips for young adults to get you started. 

10 Budgeting Tips for Young Adults

Here are Benzinga's financial tips for saving money and budgeting effectively as a young adult.

1. Start by Setting Financial Goals

When offering budgeting advice for young adults, the first step is to discover your "why." What do you want to get out of having a budget? It could be to get free of student debt, have a fantastic vacation, a beautiful home or a wealthy lifestyle.

Setting long- and short-term financial goals makes budgeting for young adults easier. A long-term goal could be paying off student loans, saving for retirement or college for your children or saving for a larger house downpayment in 10 years. Short-term goals give more immediate gratification. You can achieve short-term financial goals in a few months to a year. These could be to save an extra $100 per month for a year, to pay off your car or to cook at home more often.

To set realistic goals, look at your current income and spending and map out what you can realistically do with your current budget. You could reduce your entertainment budget, find more free activities or eat out less often. Goals should be specific, measurable, attainable, realistic and have a set time period (SMART). 

Common financial goals for young adults include:

• Start an emergency fund with at least $1,000
• Building savings equal to three months' income and keeping it in a high-yield savings account
• Contributing to a Roth IRA each month
• Learning how to put retirement savings in low-risk and diversified investments
• Paying off student loans or a certain percentage of student loans this year
• Saving for a house downpayment
• Building your credit score by making on-time payments and paying off debt
• Making plans to get health insurance if you're currently on your parents' insurance

2. Track Your Expenses and Income

Budgeting begins with knowing where you are. The most important step for a budget is to track income and expenses. It's easy to overspend when you don't know how much you spend each month. You can use apps or spreadsheets to track your expenses. 

You should also keep a detailed record of your income. This will not only help come tax time but allows you to allocate what you're earning more effectively and can help you reach financial goals. 

To maximize income, consider asking for a raise every six to 12 months. You can also continue applying for other jobs in your field. This keeps your interview skills sharp and allows you to see what other opportunities are out there. If you get a better offer, you can ask your current employer to match the offer. Finally, consider freelancing or turning a passion into a business as an additional income stream. 

3. Develop a Budget Plan

You're ready to develop and create a budget plan after tracking and categorizing all monthly expenses. Look at what you typically spend the most on, and where you might be able to cut back.

The 50/30/20 rule is a good guideline to get started. The rule divides your money into three categories: 50% for necessary expenses, 30% for wants, and 20% for saving and investing. Basic budget categories include food, housing, utilities, transportation, insurance, medical, clothing, and entertainment. Many budgeting apps can help you personalize these categories. 

To stick to your budget, allocate a certain amount of weekly or monthly discretionary funds to give yourself some wiggle room and if you can, allow yourself a treat. In the first months especially, you can also "borrow" funds from one category for another if needed, as long as you stay within the total budget. For example, if your transportation costs are low for one month, but your food costs are higher, these could balance out. In addition, build in rewards for yourself if you stick to the budget — like a special night out with friends or treating yourself to an activity you enjoy.

Reassess your budget every six months or when there is a significant change in your income or expense needs. For example, as you progress in your career, you might be able to allocate more toward savings and long-term goals.  

Other tips for sticking to your budget:

• Use an app to track spending. 
• Plan your meals ahead of time so you're not left wondering what to eat.
• Do your food shopping online to save time and take advantage of coupons.
• Never go food shopping when hungry.
• Leave the credit cards at home and pay in cash instead.
• Plan ahead for social events and budget how much you'll spend.
• Plan free or low-cost activities with friends, including hikes, picnics in the park, potlucks or days at a local beach or lake. 

4. Prioritize Your Spending

Not all spending is equal. You must cover certain basic living expenses, including housing, utilities, food, insurance and transportation. Beyond that, you can consider cutting back on non-essential items. 

For example, consider whether you need clothing every month or whether you can get a new outfit every six months. You can also cancel entertainment subscriptions, reduce eating out and wait to watch movies at home rather than at a theater. 

Strategies for saving on monthly bills:

• Set up automatic payments for recurring essential bills like utilities.
• Pay with cash rather than a credit or debit card to avoid overspending.
• Turn off lights, unplug electronics and reduce electronics use to save on electricity.
• Turn down the heat or up the air conditioning to further reduce electricity use — and help the environment.
• Turn off taps and make an effort to use less water.
• Share a Wi-Fi subscription with roommates or neighbors.
• If you're living in your own home or apartment, consider renting out a room to a long-term tenant and saving that income each month.

5. Be Mindful of Debt

While you'll want to pay off all debt in the long term, there are different types of debt you should prioritize to pay off differently. The main two types of debt are revolving debt and recurring debt. Recurring debt can be either secured or unsecured. 

Revolving debt includes credit cards, store cards and anything else where you have a credit line, but you need to pay it off each month. Recurring debt requires monthly payments of roughly the same amount for a set period of time. Recurring debt amounts will only vary if interest rates or fees vary. 

Examples of recurring debt include student loans, auto payments, mortgage payments or medical debt. Debt is "secured" if you've put up collateral to get it. If you take out a home equity loan or take a second mortgage with your home as equity, you have secured debt. Unsecured debt means you haven't put up equity. Student loans and medical debt are examples of unsecured recurring debt.

To pay off debt efficiently, focus on the debt with the highest interest rates first. Your priority should be paying off credit card debt and any high-interest loans. Then you can move on to auto, student and mortgage loans. Some recurring debts have penalties for paying them off early, so check with your lender before paying back an auto loan or mortgage early. 

Strategies for avoiding future debt include:

• Not charging more on credit cards than you can pay off at the end of the month
• If that's difficult, consider only paying cash for purchases
• Saving for large purchases so you don't have to go into debt for them

6. Invest in Yourself

Investing in yourself is important for long-term financial growth. Don't be afraid to invest in your education and career strategically. Make sure the education or career step will lead to something you love to do and greater income opportunities. Long-term investing in your earning potential is more powerful for savings than just cutting back. 

Investing in yourself for your financial future can mean greater job opportunities. Increasingly, employers are looking for people who can look beyond rote learning and bring meaningful insight and creativity to a company. Whether you earn certificates or degrees or learn new skills, continuing to learn can increase your earning potential and future job prospects.  

This doesn't have to be expensive. An enormous number of free educational resources are available now. You can watch free courses from top universities on sites like Udemy Inc., Coursera Inc. and edX. In addition, you can borrow books and current industry-specific resources from your local library. If they don't have what you're looking for, they may be able to borrow it from another library. 

7. Learn How Taxes Work

Taxes are an inevitable part of life. When considering a job offer, it's important to not only look at the starting salary being offered to assess whether the post-tax income will align with your goals. Understanding how taxes work and can help you make smarter financial decisions and even minimize the amount you owe to the government.

Quick tips to help you minimize your tax burden and save more:

• Know your tax bracket
• Utilize retirement accounts such as a 401(k) or an IRA
• Take advantage of tax deductions and credits
• Keep accurate records and monitor your taxes
• Consult a tax professional

8. Find Ways to Save Money

Saving money will look different for each family. A few ideas to get you started brainstorming include:

• Shopping for deals and discounts — coupon apps make this easier
• Cooking at home instead of eating out
• Using public transportation instead of owning a car
• Living in a smaller home or apartment or having roommates
• Finding free activities to do with friends
• Organizing events that don't require a big spend, such as a day at a local park or nature area
• Taking turns renting a movie and hosting a movie night with a group of friends
• Hosting a clothes swap with friends to get something new without spending
• Trying on new clothes to find what you like and what fits, then shopping for them used online for less
• Waiting at least a week before any impulse purchase, then deciding whether you need it
• Try simple savings plans as seen from recent Tiktok trends such as the no-spend Challenge or 100-envelope challenge

9. Seek Out Financial Resources

A professional financial planner can help you build your financial future. Seeking professional financial advice ensures you're taking steps to save now and for the future. These professionals can advise you on tax-advantaged accounts, tax rebates you may be eligible for and how to safely invest. 

The Consumer Financial Protection Bureau offers free financial resources to start educating yourself. You can also learn from free online resources like Benzinga's personal finance, investing and mortgage educational pages. 

10. Reevaluate and Adjust Your Budget Plan 

Remember to review your spending habits regularly. It's easy to slip back into old habits if you don't. As your income and lifestyle change, keep making modifications when necessary. Even with the same income, you can keep adjusting allocations or cutting back on certain expenses to reach your savings goals. 

Final Budgeting Tips for Young Adults

Remember that the earlier you start saving, the more time your money will have to grow for long-term wealth. But budgeting isn't only for retirement. Budgeting gives you both short-term and long-term financial freedom. You could save and take a fantastic vacation this year. 

Don't beat yourself up if you slip up one day or one month. Instead, ask someone you trust to help keep you accountable, make a plan, set a reward and stick to it. And as savings grow, you'll get the satisfaction of increasing financial freedom while reaping the rewards of a budget this year.

Frequently Asked Questions