Current salary plans - criticisms and suggestions for improvements for a 21 year old

Question

Hi everyone. I am 21 years old, working full time for the government as a Web Developer, and I'm looking to make the smartest decisions for my money.

Assuming I get $2100 per fortnight, my planned distributions are as follows :

• $400 for my future house downpayment
• $200 for a future car purchase (I already bought a car that I'll be holding for 3-5+ years, this will be a slow saving up for when I would need/want to buy a new car)
• $100 General savings
• $100 Travel funds
• $100 on clothing
• $300 on stocks which I'll save up to bigger amounts before actually investing to minimize brokerage costs
• About $300 for living costs

The leftovers go to my luxury fund which I can use to buy my wants.

On top of this, I'm also putting in an additional 5% to my superannuation account (Australia's equivalent to the Roth IRA), which is the maximum my employer matches, totalling to 19.5% (About $585 total) of my pre-tax salary going to my retirement fund.

Is there anything I'm forgetting, or is there anything I could improve on my current plans?

Answer 1

First of all, kudos for thinking about budgeting at 21 years old. So many people don't plan with their money, and years later wonder where it all went.

You are doing a lot of things right with your budget. You've got saving goals, namely your next car and a down payment on a house. You are saving almost 20% of your income for retirement, which is amazing.

I like the luxury fund, too. It is good to put some money aside that you can spend on whatever you want, guilt free, because you know that everything important is already planned for.

When it comes to budgeting, one thing to remember is that your budget does not have to be perfect, and it is not set in stone. If you find that your amount for "living costs" (which I'm assuming includes things like food, utilities, and rent) is too low, you can allocate more money to it and reduce something else. There is no need to feel bad if you end up having to change some things around in the budget.

Congratulations on being debt free! I would encourage you to stay out of debt. Keep the credit cards paid in full each month, and save up for your next car so you can pay cash for that, too.

Another saving goal that I would recommend adding to your budget would be an emergency fund. This is basically a pile of cash that is available to you in case something unexpected and urgent comes up that you haven't planned for. By having the emergency fund in place, you won't be forced to go into debt due to an emergency. The amount recommended is usually 3 to 6 months' worth of your expenses.