Are you a recent college graduate? Then I can imagine that adjusting to the post-grad world might be a little challenging for you. It’s a big transition stepping from the safety of campus life into the real world. Whether you graduated this month, last year, or even five years ago, budgeting for your future is really important. The habits that you form now can shape your entire life. You are not too young to begin making healthy decisions for your future. I get it, budgeting can seem daunting. I don’t like math and numbers either. But, once you have the right systems in place, budgeting can be really easy. Here are ten easy budgeting tips to get you started.
1. Set Clear Goals and Expectations
Setting clear financial goals and expectations for yourself is one of first things you should do when creating your budget. Think about your income, cost of living, loans and other debts you need to repay, and your daily expenses. Then, think about your big life goals. Are you thinking of moving out of your parent’s house soon? Planning to go back to school? Hoping to get married? All of these goals cost money and in order to make them happen, you need to start planning for them in your budget.
2. Prioritize Saving and Minimize Spending
Let’s face it, most of us love to spend. So, I’m not saying to to away with spending entirely but saving should be your priority. If you are a new college graduate, chances are you don’t have a huge savings account yet. You want to start building that up right away. If you love shopping, I recommend setting a shopping allowance that you won’t go over each month. Also consider thinking over your purchases carefully by asking yourself, “Do I really need this?” before buying.
3. Get Started with a Budgeting App
I use Mint to help me manage my budget. I love that I can use it on my desktop and on my phone. It also notifies me when I am reaching my budget or if I have gone over. It’s a great way to track your income, spending, expenses, and savings goals all in one place. If you would like to get started, read this article on how to create a budget with Mint.
4. Say “no” to Credit Card Debt
This is a big one. Credit card debt can easily get out of control if you let it. I’m sure you already have enough student loans to deal with. Still, while I advise to stay away from credit card debt, you should still get a credit card. If used correctly, credit cards can help you to build your credit score, which will come in handy when getting a car loan or a mortgage in the future. Only use a credit card to purchase items you already have the cash to pay for. Then, pay your credit card bill right away. If you cannot afford an item yet, save up for it. It might take longer but you won’t have any debt associated with it. Forbes writer Kerry Hannon puts it best by saying, “Debt is a dream killer.” It’s a huge roadblock and sucks away any income you could be putting towards your savings.
5. Less than 30% of your Income should go towards Housing
According to Student Loan Hero, less than 30% of your income should go towards housing. I get that you probably want to live in the really nice apartment with mahogany flooring, marble counter tops, and a perfect view but if getting that apartment compromises your other financial goals, it might not be the best idea. It is better to choose an apartment with less amenities and meet your financial goals, than to choose your dream apartment and struggle to find your rent each month.
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6. Budget for Fun and Entertainment
Please don’t forget to budget for nights out with friends, brunch, movies, vacations, and day trips. Your budget is not meant to limit or restrict you, it is simply meant to help you have freedom in your life and control over your finances. Don’t forget to budget for entertainment because it’s a necessary part of life and you need fun things to do besides eating, sleeping, and working.
7. Remember that Every Month is Different
Some months you will have to focus your budget on things like gifts during the holidays, shopping for the fall and winter season, saving for vacation, or spending on gifts for friends and family members. Be sure to prepare for these upcoming budget changes ahead of time so that you aren’t caught off guard when they come up.
8. Cut back on Unnecessary Spending
Starbucks every day can quickly add up. A five dollar drink every day for 5 days costs $25. By the end of the month, that’s $100. You’ll quickly find out that it adds up to $1,200 by the end of the year. Can you make your favorite Latte at home instead of ordering from Starbucks? If you eat out for lunch everyday, can you consider meal prepping for 4 days and eating out 1 day a week? Thinking about your spending like this might seem like a lot of work but in the long run it saves you so much.
9. Overestimate Expenses and Underestimate Income
This budgeting tip is probably the simplest and most effective tip on the list. Begin overestimating your expenses and underestimating your income. It helps especially if you forget to budget for something important. For example, let’s say I needed to get my hair done this weekend but I forgot to add it to my budget. Since I overestimated my expenses and underestimated my income, chances are I’ll have a few extra dollars unaccounted for that I can use towards my hair.
10. Check your Spending Regularly
My final budgeting tip would be to check your spending regularly . Choose a day of the week to sit down and look at where your money went that week. You might notice that you have been overspending within certain categories or that you have extra left over in your budget. Regardless of what the results are, it’s good to know what you have been spending on a weekly basis.
These are my top ten easy budgeting tips for recent college grads. I hope these are helpful for you. Let me know in the comments if you are already using or plan to use any of these tips to manage your finances. If you have any other tips, leave them here as they can be helpful to other readers.