Budgeting in the Real World
So you’ve landed a job right out of college. The pay is decent, and has the potential to give you a much more vibrant social life and purchasing power. And then it hits you: You don’t have the cushion of bumping up your student loans (which we don’t recommend in any case) or adding to your work-study hours to supplement your income if you run out of cash a few days before payday. The key is not getting yourself in that situation where the money drys up in the first place, and to learn how to spend — and save — your money in a way that you’re not living paycheck to paycheck. Budgeting in the real world isn’t all sacrifice, though. It’s about being realistic and living within your means. Yes, you can set some cash aside for the fun stuff, too. You just need to budget for it.
We know most of you understand that you won’t actually be getting that entire salary quoted to you in your job offer. State and federal taxes and any retirement or insurance benefits will come out of that total, although you’ll see some of that again come tax return season. The best way to get an accurate picture of your salary and how much you’re actually able to spend out of each paycheck is to fill out a budget worksheet off the bat. Budget worksheets in the job search phase can also be helpful in determining how much you’d realistically need to make in order to cover your monthly expenses. (No, this doesn’t include contributing to your flat screen TV fund.) If you’ve already started the job and are figuring out whether to order that pizza, a budget worksheet will keep you from over-using those credit cards, which, as in college, should be used in emergencies only.
Take a look at your paycheck and determine what you’ll be pulling in on a monthly basis. Subtract any taxes and other work-related expenses first, and then determine how much you’ll need to cover the rent and any other 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’re gainfully employed. Are you commuting to the new job? Factor in gas and other travel expenses. (Some lucky few may see mileage reimbursements, although you typically only see those when you travel as part of the job.) 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 in is a good way to save money, so come up with a grocery budget. We’re not completely against fun, though, so set some aside for entertainment purposes, too. 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 saving. 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 up to you. While looking at your salary realistically isn’t fun, 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
Setting 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 see where you can make cuts to, say, pay off those credit cards. Any debt you have that carries a high interest rate should be near the top of your list of priorities, 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 one month on furnishing a new apartment or buying appropriate work clothes, it’s up to you to determine what you could spend on those additional expenses while still making ends meet. This could also mean meeting your friends out less and staying in more for the month, or 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.