How to Set-up a Budget After College

Putting together a budget as you begin your career, starting a new job making probably more than you’ve ever made before, moving out of your parents’ home, signing a lease for your first apartment that you are solely responsible for, can all be a bit daunting but can also start you on a path for financial success.

It’s not always about how much you make.  Living within or below your means can make all the difference.  Start now to build good money habits for financial security. Ideally, you want to setup your estimated budget before you sign a lease or start looking for apartments as this will help you determine what you can afford.

Setting up a budget can be simpler than you might think.

Start with income.
How much money are you going to make after taxes are paid?  Be sure to subtract federal, state, and local taxes, as well as Social Security and Medicare or state retirement, as well as any deductions for health insurance. This is your “net pay,” available to spend.

Now look at your expenses.
Rent, utilities (including internet, cable, or streaming services), gas, groceries, and supplies, dining out, entertainment,  insurance (car, home/renters), clothing.  Don’t forget about loan payments such as car or student loans.  Ideally, you want to have some left over ($100-$200 or more per month) to put in savings.

Review your past expenses on your bank statements or credit cards to see how much you typically spend or if you are forgetting to include anything.  While some categories (like eating out or buying clothing), may vary by month, look at the last three or six months and use the average. This can also help you look at areas that you may be able to cut back on.

Income-Expense Guidelines

As you are starting out, try to use these guidelines to manage your income and expenses.  70% of your income is used for your living expenses – monthly bills, food, etc.  20% of your income is used to reduce debt or build up savings. 10% of your income is used to create capital for investment or future use.

If you find that you don’t have enough left to contribute to savings, or if you are spending more than you make, you need to make some changes quickly.  Review expenses to see what can be reduced.

Ways to Reduce Expenses

  • Try not eating out as often, or, choose less expensive restaurants.
  • Make your coffee at home and treat yourself occasionally to your expensive, fancy coffee drink.
  • Look for digital coupons or discounts when purchasing groceries or clothing
  • Reduce streaming costs or other subscriptions
  • Use GasBuddy or similar apps to find the least expensive gas when filling up.

If you are way over budget, then you need to look for a less expensive place to live or share an apartment with someone else.

Saving Money is Essential

While you may think you can put off saving, it is important not to neglect this.  There are two steps to starting your savings journey:

  • First, build up an Emergency Fund to support an expensive car repair or other unexpected expense. You’ll have the funds to pay for it without incurring more debt.
  • Once the Emergency Fund is built, start your Long-Term Savings Account. This will provide money for future purchases such as a home, new car, or a nice vacation.

This is such an exciting time in your life! Start now to build good financial habits.

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Profile photo of Penny Wasem, CPA, CFP, PFS, owner of Lifetime Financial Planning Solutions in Lancaster, Ohio.

By Penny Wasem, CPA, CFP, PFS

Penny L. Wasem is the owner of Lifetime Financial Planning Solutions, LLC. A summa cum laude graduate of Ohio University, Penny earned a Bachelor of Business Administration with focus in accounting and mathematics. She serves on the board of The Fairfield Medical Center Foundation, is a member of the Investment Committee of The Fairfield County Foundation and has been active on many non-profit boards in the community. Penny lives in Lancaster with her husband Eric Hubbard and is parent to Clark and Olivia Hubbard.