How to Create Your First Budget
Creating your first budget after college can be a little terrifying. When you had a college student budget, all you had to think about was paying for tuition, books and rent. Pick up a part-time job so you can buy groceries, and you’re set! But post-grad life is completely different, and your budget will reflect that. All of a sudden, student loans are due, you’re starting to save for retirement, and chances are, your parents are no longer sending you care packages every month. But don’t worry! Creating a post-grad budget that will help ease your transition into “real life” is completely manageable if you follow these tips:
1. Make a List of Monthly Payments
The first step in creating a budget post-graduation is making a list of all of the fixed payments that you absolutely have to make each month. This includes rent, student loan payments, cable, internet, gas and electricity. Because these costs are less flexible than others–like replenishing your wardrobe each season–you’ll want to form your budget around them.
2. Write Down All of Your Expenses
Next, write down all of your anticipated expenses. Think about the basics that you spend money on each month, such as food, clothing, transportation and weekend activities. If you’re having a hard time estimating what your monthly expenses will be, take a look online at the recent activity on your bank account. Don’t forget to make a note of any extra costs you anticipate to have after graduation.
3. Evaluate Your Financial Standing
OK, we know it may be painful, but you’ll need to look at the balance of your bank account–both checking and savings. Figure out exactly how much money you have in the bank, and how much you are in debt. Tally up the amount of your student loans and credit card bills too–this will all play a factor in how much your budget will allow you to spend each month.
4. Consider Your Income
Now that you have a clear idea of how much you’ll need to spend each month, it’s time to think about how much you’ll be bringing in. When you accept your first job after graduation, don’t base your budget on the annual salary that they offer you. Instead, estimate your net pay–the amount you’ll have available after taxes–and use that to figure out how much money you’ll have to work with each month.
5. Think About Savings
If you can afford it, and even if it’s a tight squeeze, it’s tremendously important that you start saving money. Your 20s are the ideal time to begin saving for retirement because you will accumulate interest over your lifetime–so every decade counts, big time. Even if you can only put a little bit away each month, it’s worth it! Try and throw a few dollars at your savings account as well so you’ll have a financial cushion in case of emergencies.
If you need help creating your budget, we love Mint.com.