Mastering Your Money

Living on your own means that you have enough money to cover your daily needs, including rent, utilities (power, water, Internet), food, and more. Here are the steps to follow to create a budget and manage your money each month:

Determine your monthly income

First, you need to understand how much money you will have coming in so you can afford to live on your own. This money may come from several sources:

• Employment income
• Supplemental Security Income (SSI)
• Social Security Disability Insurance (SSDI)
• ABLE Account
• Savings account
• Retirement accounts
• Inheritance
• Gifts/donations

To live independently, you’ll need to have a source of regular income that’s predictable so you can pay your rent and other expenses. 

Add up your expenses

The items and services we pay for are called expenses. They include:

• Fixed expenses: Expenses you can expect to be the same every month and are paid at about the same time each month. These include payments for mortgage or rent, your cell phone, or insurance premiums. Subscriptions for things like streaming services or newspapers are fixed as well, and so are memberships, such as at the gym.
• Variable expenses: Like the name suggests, variable expenses vary each month. For example, the power bill might be more expensive in the summer, when you’re running the air conditioner, than they are in the spring, when it’s cool enough to open the windows. Other variable expenses are water, food, and other things that come up occasionally, such as home repairs.

Make a list of all your expenses (both fixed and variable) each month. This is easy to do with fixed expenses, but with variable expenses, sometimes you might have to guess. It might be helpful to have someone, like a parent or caregiver, provide information about how much items cost. That way, you’ll understand what it costs to be independent in the future.

Now add up your expenses. That’s approximately how much money you’ll need to live independently each month. If you don’t, perhaps you can make adjustments to your spending.

Create a budget

Once you know how much money you’ll have and how much your expenses are, it’s time to create a budget to be sure you can afford to pay for those expenses each month. A budget is a plan that helps you track your income and expenses over a period of time. Making a budget helps you to track where your money goes and make smart decisions about your spending.

Once you’ve input your income and expenses into the budget, you’ll have to decide whether you can afford to live on your own. 

Decide your priorities

Look at your budget and decide if your money is being used in the best ways. This is where you have to pick your priorities, or the things that are most important to you, for your well-being and happiness. For example, living expenses such as shelter, food, and electricity are high priorities. 

There also may be things that are nice to have, but you don’t need them to be happy and healthy. These might include a subscription to Netflix or eating meals at restaurants. Those may be lower priorities. 

A good rule of thumb is to make a budget using the 50/30/20 formula:

• 50% of expenses on needs (high priority)
• 30% of expenses on wants (medium to low priority)
• 20% of expenses on savings (putting money aside for emergencies and goals)

Follow your spending and review regularly

A budget is a tool — and like any tool, it only works if you use it! Keep doing it every month, and pay attention to what is working and what isn’t. Be sure to track your spending and write down whether you spent more or less on each item listed. Do you need to make adjustments? Can you lower your spending? Should you move money from one line item to another? Can you put more money aside for savings? 

Take note of patterns. For example, do you notice you’re spending a lot of money shopping online? Could you buy groceries at a less-expensive store? Where is your money going, and could it be used in better ways?

There are apps and websites that can help you analyze your spending and make these decisions. Here are just a few:

• Goodbudget.com
• Fudget.com
• EveryDollar
• PocketGuard.com 
• YNAB.com (You Need a Budget) 
• Creditkarma.com/ 

Stick To It!

Budgeting can be hard sometimes, especially when you’re getting started. But don’t give up! Don’t be afraid to ask for help. Everyone struggles with budgeting sometimes; that’s normal. If you stick to it, before long, you’ll have more money for the things you need and want.

Your Turn 

One great place to start is with a simple budget worksheet, like this one: