The ultimate budgeting guide for 20-something young professionals

– Chanelle Taylor (Director, Cornerstone Financial Planning)

We all know that setting up a budget and sticking to it, is important for financial growth and well-being, but that’s often easier said than done, especially if you are just starting out as a young professional. That’s why Cornerstone Financial Planning has put together the ultimate budgeting guide, specially designed for 20-something young professional. Our 6-step guide contains practical and useful tips that will help you to make the most of your first pay check, while showing you how to save and spend more wisely.

  1. Make your own coffee

This might seem like a ridiculous addition to the list, but with coffee chains popping up at every corner along with the status that is associated with holding a brightly branded coffee cup, you’ll be surprised at how much you’re spending on hot drinks. In the US, many 20-something professionals will buy take away coffee at least three to four times per week, according to a recent study by Bankrate.com. If we translate that to South African standards, young professionals can easily be spending up to R600 per month on brewed coffee, which could be equal to nearly 5% of their monthly income. Needless to say, it’s far better to buy an equally quirky and creative travel mug and brew your own coffee at home at a fraction of the cost.

  1. Be careful of having multiple streaming subscriptions

If you are a typical 20-something, you probably have multiple streaming or download subscriptions including audio streaming apps like Deezer or Spotify, entertainment services like Netflix and Showmax and if you’re a gamer, you’ll probably add Steam and Blizzard to the list. Although these services are innovative and great to have, you’ll often find that when adding up the monthly charges of these subscriptions, they cost you a lot more than you might think. This is especially true if you have multiple subscriptions to similar services (e.g. paying for both Deezer and Spotify). Try and stick to one or two services that you use often and unsubscribe from the rest. It’ll end up saving you a couple of hundred rand each month and you might not even miss the ones you cancelled.

  1. Eat out less often

We’re not saying that you should avoid good food and company altogether, just limit your visits to restaurants and fast food outlets. The beautifully crafted market food and flavourful meals at interesting eateries you might often enjoy, are truly expensive, even though it might not seem like a lavish expense at the time. If you start adding it up, you’ll find that you can easily make three to four meals using fresh groceries for the same price of one restaurant meal.  Although it can be difficult to cook for one on a tight budget, there are many website and Instagram accounts that provide easy, cheap and nutritional recipes like @mealprepsociety and @mealpredaily.

  1. Make responsible use of loyalty programmes

Firstly, note the word responsible. By no means should you buy items or services merely to earn loyalty points or rewards. That said, the correct use of loyalty programmes can be a great way to take advantage of savings, coupons and other rewards. Nowadays, most retailers offer some form of loyalty system and to join is mostly free. In addition to reward programmes, you can also make use of coupon apps like Snap ‘n Save to stretch your budget even further by getting cash back from various items.

  1. Look at your address – can you really afford it?

It’s every young person’s dream to live in the coolest, trendiest and most fun part of town, but the price tag that comes with these in-demand addresses is often way more than a newly employed 20-something can afford. Most financial experts agree that rent or housing should not take up more than 30% of your income each month, yet many young professionals spend up to half of their salaries to live in the neighbourhood of their choice. This leads to many of them making unnecessary debt or skimping on food and other important items in order to afford their residence. Before you decide on your first flat, take an honest look at your income to ensure that you are not biting off more than you can chew.

  1. Make use of a budgeting app

If there is an app for everything, your monthly budget should be no exception. From Mint to Goodbudget, Wally to YNAB, there is an array of budgeting apps available, each catering to a specific need or budgeting problem including overspending and budgeting for couples. By using a budgeting app, you can easily track your earnings, spending and savings without ever needing to set up a spreadsheet. Many of these apps also include useful tips and tricks that can help you to improve your financial wellbeing.

If you are struggling to set up your budget and you need expert advice, contact Cornerstone Financial Planning to find out how we can help you to start your career with your best financial foot forward.

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