Recent College Grads: How to Create Your First Budget in 30 Minutes or Less
Managing your money is one of the keys to success as a new college graduate. As you transition into the real world, you'll need to work with a budget that corresponds to your new lifestyle and helps you keep tabs on your expenditures, all sources of income, and savings goals. Your budget will act a roadmap for managing your personal finances successfully, so you need to make sure it's as fine-tuned as possible. Get started on that budget the old-fashioned way with a pen and paper, then decide whether you want to create a spreadsheet or use some type of budgeting software.
Use this guide to create your first budget in 30 minutes or less:
Step 1: List Your Income Sources.
Estimated Time: 3 minutes
Whether you've managed to secure a new job right out of college or are still working part-time at a job you had during your college days, you need to know exactly how much money is coming in each month. Create your budget based on all your sources of income you earn over the course of the month. The income column of your budget needs to include your income after taxes.
Step 2: Identify Fixed Expenses.
Estimated Time: 7 minutes
Maybe you've moved to a new apartment off campus, moved back in with your parents, or you've purchased a new car to get you to your first job. Graduating college usually marks the beginning of a whole new set of fixed expenses you're responsible for. These expenses won't change much from month to month and are typically just the basics. Your budget will need to reflect the fixed costs of living for your new lifestyle, including rent or housing payments, utilities, car payments, credit-card payments, and other expenses you don't expect to change each month.
Step 3: Identify New Expenses.
Estimated Time: 5 minutes
Now that you're no longer a college student, you'll need to reconfigure your budget so it reflects your new cost of living. You'll probably have a list of new recurring expenses and fixed expenses to manage. Make a list of these new expenses, which may include student loan payments, health insurance, auto insurance, and transportation costs. An easy one to overlook: the cost of food. Now that you're no longer on a student meal plan, you'll need to put together a realistic food budget based on your weekly menu.
Step 4: Set a Savings "Expense."
Estimated Time: 3 minutes
Paying yourself first needs to be a priority when putting together your personal budget. You need to allocate a portion of your monthly income toward a savings account, and one of the easiest ways to do that is by setting your savings allocation as one of your fixed expenses. Consider a number that you're comfortable with--usually around 10 percent of your income after taxes--and add that figure to your expense budget. This is a smart money move at any age and will get you in the habit of saving a percentage of your income.
Step 5: Identify Variable Expenses.
Estimated Time: 7 minutes
Variable expenses are the expenses you have some control over. These typically cover the costs of entertainment, eating out, subscriptions, clothing, and travel. You decide how much of your monthly income goes toward these purchases and you can adjust the amount at any time. Prioritizing what's most important to you after your fixed and new expenses, and your savings are taken care of, is one of the crucial aspects of putting together a budget. Create categories and play around with different numbers to figure out what you are comfortable with and what you can truly afford.
Step 6: Select Your Tools.
Estimated Time: 5 minutes
While listing everything on paper is a great start, you can make things easier for yourself by creating a spreadsheet or using online tools and budgeting software programs. Creating an accurate budget can be tricky the first time around, so it can be helpful to use some type of budgeting tool to keep track of your weekly expenses and set goals. If you want to keep things simple, transfer all of the data you have to a spreadsheet so you have a good visual to work with.
Sabah Karimi is a columnist at Wise Bread--where you can find more financial tips for recent college graduates.
