3 Things to Consider When Creating a Budget

How confident are you in your financial knowledge? Of these three financial literacy questions, how many do you think you would answer correctly?

What if you had $100 in a savings account, and the interest rate was 2% per year. After five years, how much do you think you would have in the account if you left the money to grow?
Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, how much would you be able to buy with the money in this account?
Do you think the following statement is true or false? Buying a single company stock usually provides a safer return than a stock mutual fund.

According to the Stanford Initiative for Financial Decision Making, only 14% of adults younger than 35 were able to correctly answer these three financial literacy questions in the FINRA Foundation’s 2021 National Financial Capability Study. For most people, the years before age 30 mark the start of their professional lives, according to Stanford University. During this time, you’re not only learning how to succeed at work, but you’re also building the financial skills and habits that will shape your future.

For many young adults, this is the first time you take full responsibility for your own money. Because of that, we want to share a few financial literacy tips that can help you become more financially secure in the years ahead.

SMART Financial Goals

When crafting financial goals, you want to make sure they are realistic and attainable. One way to do this is to follow the SMART format, which is an acronym for a framework that helps people design specific, measurable, achievable, relevant, and time-bound goals for a variety of different goal-setting contexts. Using this approach, you can track financial goals with clear action steps and timelines.

An example of a SMART financial goal is to reduce spending on take-out meals from $80 a week to $40 a week for the next three months and put the extra savings into a retirement savings account. Or, put aside $100 from your biweekly paychecks over the next 10 weeks and instead add that savings to an emergency fund.

Pie chart with three categories that make up a budget: goals (20%), wants (30%), and needs (50%)

Crafting a Budget

Once you establish financial goals, the next step is to develop a budget to help you reinforce your goals. A common framework, which Chase breaks down, is the 50/30/20 budget rule. This framework allocates 50% of your income for basic needs like utilities, rent, and car payments. The next 30% could be used on things like vacations, electronic devices, and clothes, and the remaining 20% goes toward your future savings for investments, an emergency fund, and general retirement savings. There are many ways to develop a budget—the point is to find a strategy that works for your situation, encourages saving, and keeps want-spending down.

Credit Card Debt Management

A big factor in overall financial well-being is managing debt. According to data from Experian, in 2025 the average credit card balance for a person between 18-28 years old is $3,493.

Poor debt management can lower a credit score, which can lead to getting denied for loans or paying higher interest rates when buying a house. Debt also makes saving and investing much harder since it means paying more in interest over time, which can delay long-term financial goals like saving for retirement.

Strengthening Your Financial Foundation

Wherever you’re at in your career, having strong financial habits can provide a solid foundation for your future stability and make it easier to stay in control of your finances.

Sources:

Daugherty, Kate. “How to Set and Achieve SMART Goals: A Step‑by‑Step Guide.” SUCCESS (January 18, 2025). doi: https://www.success.com/how-to-set-smart-goals.
Horymski, Chris. “Average Credit Card Debt by Age in 2025.” Experian (September 17, 2025). doi: https://www.experian.com/blogs/ask-experian/research/credit-card- debt-by-age/.
Fidelity Investments. “8 Ways to Help Improve Your Credit Score.” Fidelity Viewpoints (October 21, 2025). doi: https://www.fidelity.com/learning-center/personal-finance/improving-credit.
JPMorgan Chase. “What Is the 50/30/20 Budget Rule?” Chase Education Center (accessed March 24, 2026). doi: https://www.chase.com/personal/banking/education/budgeting-saving/50-20-30-budget-rule.
Stanford Initiative for Financial Decision Making. Stanford University. Accessed March 24, 2026. https://ifdm.stanford.edu/dataviz.