The No.1 Budgeting Tip For Young People

Your life is expensive: clothes, cell phone bills, internet service, cable TV, dining out, movies, concert tickets and nightclubs (with cover charges and high-priced drinks). How are you possibly going to afford all this on an entry-level salary? Maybe you need to change the people you hang out with.

The 40 million people in Generation Y (those born 1980 to 2000) have a combined disposable income of $200 billion. That's enough to make any product marketer salivate. The rest of the world pays close attention to the products you choose because you not only influence each other, but studies have found that your preferences shape your parent's purchasing decisions on everything from groceries to big-ticket items.

Your BFF Could Make You Broke
Shopping is a social experience for those in their late teens and early twenties. Peer pressure has always existed but today's youth have the power to share product preferences with hundreds in a single click via email, IM or Facebook. Personal recommendations may be a valid product selection tool, but it's difficult to be financially savvy when spend-thrift friends constantly barrage you with a never-ending shopping list.

You may not think you have a problem because you buy inexpensive items, but the frequency and volume of shopping poses a threat to already strapped bank accounts. When friends coax you to break your budget, don't be afraid to call them out on it.

Compare the price of their purchases to something practical but completely unrelated like six months of cell phone service. Use subtle anti-shopping signals. For example: when your girlfriend pulls an expensive dress off the rack and asks your opinion, just shake your head. (With a little planning, you can maintain your social life without breaking the bank. Check out Budget Without Blowing Off Your Friends.)

Once You Start Spending, It's Hard To Stop
Credit cards companies love Generation Y because they know you can't possibly have enough cash to buy everything you want. They expect you to use your credit card for everything from fast food to downloaded music so they can charge you high interest rates.

They also know that consumers tend to become more brand loyal with age. That's why they want to get you hooked on their stuff now, since they expect you to continue to be a customer for the next 20 years. (Make sure you're in control of the card and not the other way around. Read 6 Major Credit Card Mistakes.)

Shopping as a form of entertainment can become a lifelong addiction. It often leads to spur-of-the moment purchases. As your income increases, your shopping sprees become more expensive. If cruising the mall with your buddies has already become a habit, perhaps it's time to find a new hobby.

Be A Frugal Maven
It's also easier to buy stuff with 24-hour online shopping and credit cards for teens. So, what's a young, financially responsible person to do? Create save vs. buy coping methods like the following:

• Keep an eye on people who spend responsibly and befriend them. You'll feel comfortable not having to say no to expensive escapades.
  
  
• Let your friends know that you are working toward specific financial goals like a new car. They will understand why you don't take them up on every spending opportunity.
  
  
• There are more things for you to buy because technology is changing at such a rapid pace. For example most people replace their cell phone every few years. It's difficult to keep up with everything. File all referrals to products you don't absolutely need today in a favorites email folder. It'll be there when you need it.
  
  
• Don't pine over "stuff." Sitting around thinking about all the "things" you want to buy will only entice you to go out and spend your rent money on it. If someone around you is obsessed with an item, distract them by changing the subject.
  
  
• Don't take all credit cards and ATM cards with you. If you don't have it, you can't spend it. (For more tips, check out Five Money-Saving Shopping Tips.)
  
  
• Volunteer to be the pickup person for concert tickets and pizza. That way you can make the decisions about how much to spend. Have your friends pool their money ahead of time so that everyone contributes.
  
  

The marketing world revolves around you and your buddies. You control what becomes the next big thing. It is your responsibility to choose carefully. Start by carefully selecting your friends. (Learn what to watch for before you find yourself drowning in debt or filing for bankruptcy. Check out 5 Signs That You're Living Beyond Your Means.)