Budgeting in the Real World
Have you landed a job right out of college? Post-college pay is typically decent and gives you more vibrant social life and purchasing power than before. However, you no longer have the option to add hours to your work-study to supplement income if you run out of cash a few days before payday. Avoiding situations where you are low on money is easy when you learn how to spend and save in a way that you are not living paycheck to paycheck. Budgeting in the real world is not all sacrifice, though. It’s about being realistic and living within your means. Yes, you can set aside money for fun, personal spending. You just need to budget for it.
It is obvious that you will not be receiving the entire salary quoted in the job offer. When you factor in state and federal taxes, as well as any retirement or insurance benefits, you will see a healthy reduction in pay, although it will most likely come back during tax season. The most accurate way to calculate salary and how much can be spent from each paycheck is to fill out a budget worksheet. Budget worksheets in the job search phase help determine how much you realistically need to be making to pay expenses. If you’ve already started the job and are figuring out whether to make a personal purchase, a budget worksheet will keep you from over-ussing credit cards, which, as in college, should be used in emergencies only.
Take a look at your paycheck and determine what you will need to pay monthly. Subtract any taxes and other work-related expenses first, then determine how much you’ll need to cover rent and any miscellaneous housing-related costs, like utility and cable payments. Subtract what you’ll be paying toward your student loan debt, as you won’t have the option of deferring your loans if you are gainfully employed. Are you commuting to the new job? Factor in gas and other travel expenses. Are you carrying a balance on any credit cards? Subtract what you’d like to realistically put toward those totals; you should try to pay well over the minimum to avoid giving those credit card companies much in exorbitant interest fees.
Finally, consider your living expenses. Eating home is the optimal way to save money, so come up with a grocery budget. Of course we are not completely against having fun, so set aside money for entertainment purposes. Is there any left over? This doesn’t mean you should celebrate by buying a new pair of shoes; as soon as you’re able, you should start savings account . Many employers will offer retirement benefits or other savings accounts that are automatically deducted from your paycheck, but saving up for an emergency fund or a down payment on a new home or car will be your initiative. While looking at your salary realistically can seem overwhleming, it does help keep you from falling into more debt and determining whether you need to either cut back or pull in more income to pad your monthly salary.
Set Your Priorities
Establishing your priorities when it comes to filling out your budget worksheet will help you not only meet your obvious goal of paying your bills each month, but will help you visually determine areas needing attention, such as paying off credit cards. Any debt that carries high interest should be of first priority, after your monthly list of bills (student loan payment, car/health insurance, you know the drill). If you’ve only been making the minimum payments and barely making a dent in those credit card totals, it may be time to reprioritize to pay your cards off faster. If you need to spend more on home furnishing or new work attire, it’s your responsibility to see what you could spend on those additional expenses while still making ends meet. This may call for less time out with friends and instead looking for a supplemental income source if you don’t have a lot of wiggle room in your budget. Budgeting in the real world can mean making some tough choices, but you’ll be thankful you made some sacrifices and spent within your means when you’re on solid financial footing with some savings to boot.