I am a teen with virtually 0 bills. I work 14 hours a week at my job where I make $11 an hour plus around $50 in tips a week. Can someone help me come up with a budgeting technique to save money? I am looking to invest a hefty amount into the S&P 500 to not touch for at least 5 years or so.
Good on you for looking to budget so early in life! A good approach you could use is a proportional approach. With your take-home pay, put aside percentages towards saving and spending. You have near zero bills, so you can afford to:
- 20% towards fun stuff - spend as you wish.
- 20% towards a longer-term fun goal like a holiday.
- 50% towards building an emergency fund with a set goal (e.g., $2K or whatever you wish).
- 10% towards any normal expenses you have.
For your tips, I’d personally throw those at a savings goal. Start tracking both your income and expenses regularly. Gain a handle on where you spend your money. As you get familiar with tracking, you may wish to try other budget processes. Start building a habit of saving and tracking. Those two alone will help you in your future. Also, spend time learning about investing; the Money Guy YouTube channel is a good resource.
Khan Academy is a free online tool to help you learn financial literacy. There’s a budgeting rule they state: 50/30/20. 50% of your after-tax income goes to needs, 30% to wants, and 20% to savings. This can be adjusted. For investing, look into a Roth IRA; I use SoFi for mine. You could also look into high-yield savings accounts and CDs. I have high-yield savings accounts with Discover and Betterment. Use NerdWallet and Bankrate to compare accounts and see what works best for you.
You need to be at least 18 to open a brokerage account for investing. If you are still a minor, you can invest in a high-yield savings account (HYSA) until you turn 18, and then contribute to a brokerage to invest in stocks. At 18, I’d also start investing in a Roth IRA. For budgeting, keep 20% of your pay for spending and fun and save the rest.
Consider setting specific savings goals, like a certain amount for your emergency fund or future investments. This can help you stay motivated!
Look into apps that help with budgeting and tracking expenses. They can make the process easier and more visual, which can keep you engaged.