How to budget in your 20s

The Gen Y lifestyle can be ?pretty expensive.

It all comes down to how much disposable cash you have in your budget and, if you don't have the phone, the clothes, the food or the travel snaps you can start to question your own relevance.

The worst part is that these days you don't even have to be rich to live large.

If you've got access to a credit card you can have any social image you want. But if you look at the greater scheme of things (as I tend to do), overspending leads to debt, a bad credit score and a strike against your name for any future borrowings.

Cut up your card

If you want to get serious about your savings, throw away the spending ammo by cutting up your credit card. Credit cards do have a purpose. Rewards cards can help diligent saver-spenders and small business owners earn frequent flyer points.

A family might sign up for a credit card to help cover emergencies. But if the sole reason for owning a credit card in your 20s is to allow yourself to live a lifestyle you can't afford, you need a reality check.

McCrindle Research reports Gen Ys are the most likely people to be in debt, with 34% of all registered debt agreements (for those having trouble meeting repayments) belonging to the 25-34 age group. You can't have your cake and eat it too; you can't save and live beyond your means - it's mathematically impossible.

Reduce your spending on food

Food usually accounts for a large chunk of your budget. According to the Australian Bureau of Statistics, for 25- to 34-year-olds the average household spend a week on food and beverages, including alcohol, was $231 back in 2010.

That's a pretty extravagant figure if you're single. Perhaps it's time to start living more modestly.

If you stop buying lunch five times a week at $10 a meal, you could save more than $2000 in a year. Cancel that additional $3.50 morning coffee and your total savings will climb past $3000. For that amount you could go on a great holiday.

You could fly interstate and buy all the lunches you like. And that's just by cutting out your daily panini and coffee.

Start buying your devices outright

Amenities can be a tricky one. Your phone data and home wi-fi are essential for work and study but they can cost a fortune if you don't choose the right products. A rule of thumb would be to avoid buying a phone on a plan, as it works out to be more expensive.

If you buy a 16GB iPhone 6S from Kogan, it will cost $939. Add a 3GB pre-paid plan with Kogan, which costs $29.95 a month, and the total expense would be $1658 over two years.

To buy the phone through a Vodafone contract with the same amount of data would cost $1944 over two years. Opting for a pre-paid plan can save you more than $11 a month, which is better used elsewhere. It's not much but every dollar counts on a tight budget.

Keep up with your spending

Has your wallet gone digital? When you purchase everything on a card or an NFC device it can be difficult to keep track of your spending.

If you need help budgeting, you can download the Pocketbook app for your iPhone or Android phone to help you stay on top of your finances. The app syncs with your bank accounts and monitors your income and expenditure.

You can set a "safe spend" limit for your weekly or fortnightly budget and it sends you a notification every time you come close to a blowout. You can even categorise each purchase, giving you a clearer idea of where your money goes.

The rest is all about balance. It's not about giving up everything that makes you happy - you can still go out and have a good time. You just have to be realistic and tailor your lifestyle to your budget, not vice versa.

If you're saving, make sure you pay yourself first - open up a high-interest savings account and make your transfers as soon as you are paid.

Planning is not for everyone. If you live at home your budget probably doesn't need to be quite as strict. You might not have any financial goals - and like it that way.

But in a few years you might think differently and have a pile of debt to sort out before you can get started.

It's about balance - you can still go out and have fun.

Get stories like this in our newsletters.