FFY: A Guide to Creating a Basic Budget

​As a former foster youth, you may have been thrust into the world of adulthood without being adequately prepared for the financial challenges that come with it. While there are many aspects to consider when planning your own budget, the good news is that you can create an effective budget with little knowledge. In this blog post, we’ll be discussing how to create a basic personal budget so that you can get on track financially and move forward in life. 

Start Tracking Your Income and Expenses 
Knowing where your money is coming from and where it is going each month is essential for creating any type of budget. To do this, start by listing out all of your income sources (such as wages from work or government benefits). Then create a list of all your expenses (rent/mortgage payments, food costs, transportation costs etc.). Make sure to include both fixed (those that stay the same every month) and variable expenses (those that change every month) like utilities and entertainment costs respectively. Once you have determined how much money is coming in and going out each month you can begin setting up your budget accordingly.  
 
Steps to Successful Budgeting

1. Determine your monthly income (how much you bring in each month). If it's not consistent every month, determine the average amount. 
   
   
2. Determine your expenses, and note which are necessary expenses (rent, utilities, food, medication, transportation, credit card minimum payments, etc.) and which are unnecessary (streaming services, non-necessary clothes, home decor, etc.). 
   
   
3. Calculate the total of all the necessary expenses. This is bear minimum amount you need to get by. 
   
   
4. If your necessary expenses (amount in step 3) are more than your income (amount in step 1), you need to do at least one of the below: 
   
   a) Cut costs. Can you live in a less expensive home/apartment? Can you take the bus instead of needing a car? Can you use less electricity to keep your utilities low? Can you get a roommate to share rent with?
   
   b) Increase your income. Get a second job, take on more shifts at your current job, negotiate a raise. Consider if you own any items you would be willing to sell.  
   
   c) Look for community resources. You may qualify for community programs like SNAP (formerly food stamps). You may also be able to visit local food pantries and clothing closets. As former foster youth, you may qualify for other programs in your community. Search Google for "former foster youth + Your city" to see what programs are available in your area. Take advantage of these programs! They exist to help you!  
   
   
5. If you're necessary expenses are less than your income, congrats! Determine how much money you have left after "necessary" items. Put away at least half of your left-over money in savings. Your goal should be to save up enough money to cover 3-6 months of expenses as quickly as possible. You should use at least 25-40% of the left-over amount to pay off debt as quickly as possible, starting with the debt that has the highest interest rate. 
   
   
6. Once you've determined how much you'll save and put towards paying off debt each month, you can determine which of your "unnecessary" items you can and would like to add back in. Remember, even if you can't add them all or any of them in now, with some work, you may be able to down the road. You may determine you'd like to use all of the remaining money into savings and paying off debt, which is really smart! But I also remember being a young adult, and realize that having a little bit of money to spend on fun things helps to keep you motivated to keep saving. 
   
   
7. Once you've saved enough for 3-6 months of expenses and paid off your debt, you can set up other financial goals like saving for a vacation or for a new home! Do NOT be discouraged if it takes you a while to get to this point -- if you stay focused and on track, you can get here!

Tips: 

• Avoid taking on any new credit cards or loans (especially short-term loans) if at all possible. These have the tendency to have big interest rates that will push you further into debt. 
• Make friends with people who are also on a budget. You'll know that they have similar goals to you and you can help each other stay on track. 
• Find a budgeting mentor. This is likely someone at least a bit older than you who has reached some of the financial goals you see for yourself. It may feel strange to ask them, but they would likely feel honored that you would value their thoughts. 
• Watch out for things that are illegal. As a foster youth, people may target you to do jobs or participate in something that isn't legal. Remember the old adage "if it sounds too good to be true, it probably is".  While it may sound like a quick way to make money, it will likely cost you down the road through big fines, legal fees, etc. If the job involves sex, betting, drugs or taking money from others, it is probably illegal and to be safe, you should avoid it. 

Creating a basic personal budget does take some discipline and dedication, but it is possible! With some careful planning and consistent tracking of income and expenses, former foster youth can set themselves up for success financially despite having limited resources available at their disposal! So don’t be discouraged—take those first steps today towards setting yourself up financially for life! You won’t regret it! Good luck!