Happy Monday! I did a Twitter poll last week for what exactly y’all wanted from me, what you needed the most help with when it comes to navigating post-grad life. A lot of you said your finances were what you were having the most trouble with, so I thought I would give you an idea of where to start with how to budget your paycheck. Growing up the daughter of a CPA has given me a built in financial advisor who has always given me the best advice when making big life decisions that affect my finances
I thought I would share some of the advice my mom has given Matt and I in terms of budgeting. Please realize that I’m not a financial advisor, this is just how we try to do it. I’d love any advice at the end of the post that you think I missed!
How to Budget Your Paycheck
- Start with what you have to pay in rent, utilities and any loan payments: Total what you monthly bills will be, these should be pretty consistent. One thing that might change is what ever utility you use to heat/cool your living space. (We’ve noticed a big difference this fall when we didn’t have to heat or cool our apartment.) Your paycheck should be able to more than cover all of these. If you’ve just graduated or haven’t started making loan payments yet, it’s a good idea to budget for them anyway so that when you do have to start making them you’re already prepared. Just keep this amount in your savings!
- Look back at past months and estimate your food, transportation, entertainment and clothing budget: This is hard, because you might have to cut back on Bachelor take-out nights, or ditch cable and just pay for Netflix and Hulu. Be honest with your self about your priorities. We literally wrote down what was important to us and then went from there.
- Now think about your savings account: A really good rule of thumb is to try and have three months worth of living expenses in your bank account. It doesn’t happen overnight, but you should try to put as much as possible into your savings. If you have two sources of income, think about trying to only live off of one source and put the rest into savings. It’s not easy, but you’ll be happy that you’re able to afford a new car when your old one bites the dust, or a plane ticket home when you need to go.
- What are you saving for?: Now that we’re adults (sorry to use that word), it’s time to think about what’s on the horizon. Maybe you’d like to be able to travel abroad once a year, or afford five weekend trips a year. Are you saving for a house, a wedding or to be able to afford a really nice pair of shoes whenever you want? Do you want to pay off all of your debt or buy a new car? You’re going to have to adjust some of your extras to get to your savings goal, but I’m sure it will be worth it!
I Have a Budget, Now What?
- Schedule automatic payments: Now that you have your paycheck budgeted, set up automatic bill payments so that you never forget to pay them. If you can’t do that, set up reminders in your phone or calendar to pay them every month.
- Try to never carry a balance on your credit card: This can be difficult, but try to never not pay your credit card off in full. I’ve always thought of my credit card as something I had to pay off every month. In lean times, I’ve carried it over for one month, but nothing more.
- Stick to your budget: This can be really hard because yes that cute pair of shoes is on sale, but you’d go over your clothes budget. I’d love to try out the hottest restaurant every week or go out with my girls every Saturday night. But financial security and knowing that I can sustain myself is so much more important!
- Revise when you need to: Maybe after a couple of months you realize you can spend less in clothes, and save more. Or maybe you get a raise and decide to spend more on rent or buy a new car. You can totally do that, I encourage you to take a good look at your budget at least every three months!
Budgeting isn’t fun, and honestly it’s the last thing you want to do with your new found big kid paycheck. But setting yourself for financial stability in your early twenties is going to make the many amazing chapters of your life that are coming up so much better!
How do you budget? Do you have any apps or spreadsheets you use? Please share below!