After a bittersweet graduation and an extensive job search, budgeting may be the last thing on your mind.
But despite what your college lifestyle may have led you to believe, the dance floor is not the last place you’ll be hearing about dolla dolla bills — in fact, you’re more responsible for your finances now than ever.
Your post-college expenditures won’t just consist of late-night library vending machine raids and beach week martinis, but also rent, utilities, insurance, and, well, everything else.
It may sound scary, but have no fear — here are some tips on how to create and perfect your first post-grad budget.
1. Count your money.
First, figure out how much you have and if you’re in any debt at this instant by calling or checking online to view the numbers in your checking and savings accounts, and pulling out loan statements and deadlines.
Then, factor in how much money you’re bringing in, which means combining your salary with the money you receive from any part-time jobs, internship stipends, tips, and any other supplementary income.
“It is vitally important to take a holistic view of both your personal ‘balance sheet’ [a spreadsheet of] assets and liabilities, otherwise known as ‘what you own and what you owe,’ as well as your personal income statement — income and expenses — when creating a budget,” says Chris Bumcrot, a financial researcher and a partner at Applied Research & Consulting in New York City.
Bumcrot credits the importance of being conscious of your financial standing to avoiding debt, but it’s essential to structuring your budget, too — even if you’re in the clear!
2. Do your homework.
While you can easily calculate your savings and spending, it’s impossible to know how much certain necessities cost without asking around or looking it up.
Once you move in to your apartment, your bills will show you how much you’re spending, but there are a few things you can do between graduation and move-in day to make sure you’re in for no surprises: call up your utility companies — the guys who supply stuff like your water and electricity (they don’t arrive by magic) — and the landlord of your apartment complex.
If you’re using a broker to find your new apartment, find out what percent he or she charges and calculate your expenses based on your rent. Even if you’ve been moved in for a while, be smart about the way you estimate your costs. Look over credit card statements from previous months and calculate the average amount you spend on an item monthly.
Factor in important details, like how much of your salary goes to taxes each month, so that your estimates are as accurate as possible.
Don’t just research your costs — read up on ways you can pay them, too. Consult your parents to figure out just how much they are willing to support you, if at all. Search for alternative ways of paying off significant costs like student loans.
“One of the things that the federal government has done is offered different options for paying student loans; they recognize that students have bills to pay and may be in transition,” says Craig Daugherty, director of financial aid at Kenyon College. “There are certainly some loan repayment options: if you go to graduate school, for example, or if you serve in the military. My advice to any student would be to stay in contact with your lender and to see what options may be available.”
3. Use a toolkit.
The web is full of budgeting instruments that are enormously helpful in tracking your financial standing and compiling information about your savings, checking, investments, car, and living expenses into one online account.
Mint.com for instance, has gained incredible popularity for a reason: among other features, Mint allows you to determine your “net worth” by calculating all your assets and liabilities in one place, categorize your expenses, and know when you’re approaching a budget deadline through alerts.
LearnVest.com is another fantastic online budgeting resource; founded by a Harvard Business School dropout, LearnVest connects its members with financial experts who assist in developing a budget as well as a long-term plan. The site also publishes tons of useful articles and tips on how to budget and save effectively.
Not ready to take the dive into a membership, but still looking for information?
Bumcrot recommends checking out other public resources like FeedThePig.org, provided by American Institute of Certified Public Accountants (AICPA), and SaveAndInvest.org — Provided by Financial Industry Regulatory Advisory (FINRA) Investor Education Foundation, both of which provide helpful information, quick tips for financial stability, and savings calculators.
Other informative sites include CNN Money’s Debt Reduction Planner, NetQuote.com(for free insurance quotes) and BankRate.com, which allow you to look up bank, mortage, auto loan, insurance, tax, and other rates.
4. Fill in the blanks.
Now that you’ve gathered enough information about your expenses, list them on the “what you owe” side of your balance sheet.
Don’t forget to consider the costs of starting out on your own. Sites like the ones listed above not only help you organize your budget, but also add items to it that you previously overlooked. Daugherty sees many recent graduates who fail to factor in invisible costs.
“When you start a professional career, there are several start-up costs,” he says. “In an office setting, for instance, you need to update your wardrobe — a few new suits, for instance.”
Bumcrot agrees that many young adults should be thorough with their budgeting.
“The most commonly overlooked expenses by young graduates when budgeting are insurance and taxes,” he adds. “Make sure you account for health insurance, auto insurance, federal and state/local income taxes, Social Security tax, and Medicare tax. Some of these will be taken out of your paycheck automatically, but you still must account for them in your budget.”
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