How to Plan Your Budget in Less Than Half an Hour for Recent College Grads
Learning how to mange your money definitely one of the key factors to be successful on your financial life once you graduate from college. In fact, the transition into the real world can shock more than one graduate, and if they are not careful with their finances, they can end up facing substantial loses.
Of course, one of the aspects to deal with when managing your finances after you graduate from college is to work with a budget that aligns with the lifestyle that you will have from now on and that helps you keep track of all your expenses, all of your income and, most importantly, of all your saving goals. In this sense, your budget will serve you as a roadmap for achieving your personal finance goals with ease. Because of this, you need to invest the necessary time now to make sure that your budget is as fine-tuned as humanly possible. So go get your iPad, open Excel on your computer or grab a pen and paper and get ready to start creating your budget in half an hour or less:
Listing Your Sources of Income
If you’ve already managed to find a job coming right out of college or simply if you just kept a current one you are at, it shouldn’t be hard for you to know exactly how much income you receive each month. Also add to that any other source of income that you might be getting on a constant basis over the course of the month.
Note: Don’t forget that the income side of your budget has to be your income after taxes.
Write Down Your Fixed Expenses
When creating your budget, one of the most delicate aspects to consider is your expenses. The reason for this is that sometimes we tend to take some things for granted, and then we realize all to late that this or that other expense actually is part of our lifestyles. Consider the apartment you are living in, a car you might be still paying, a personal loan you might have taken and so. Graduating from college usually brings in new kinds of expenses, and they are easily calculated if you take your time. In short, your budget has to reflect the fixed costs that your new lifestyle will bring that you don’t expect to change each month.
Quantify All Your New Expenses
One of the things that require your immediate attention as soon as you graduate is to reconfigure your budget to reflect your new living costs. New recurring expenses might start to appear and might ending up even adding some substantial amounts to your recurring costs. Recognize and make a list of all these expenses (which may include personal loan payments, health insurance, car financing and more) without forgetting the more obvious ones, like your new food budget, since now you will not be on a student meal plan anymore.
Set Your Savings as One of Your Expenses
Naturally, the most important thing after receiving your monthly funds is to “pay yourself”. However, you should resist the temptation to do so right away. Instead, set yourself a fixed “expense” that you can apply to your savings. Usually, 10 percent of your earnings after income taxes should be enough. This kind of “mandatory” saving is a very smart financial move that works at any age and will not only get you some nice “emergency funds” for whenever you need them, it will also get you in the habit of always saving a bit of your income.
List Your Variable Expenses
Your variable expenses are the ones that you don’t have much control over. Some examples of these are the expenses on entertainment, dining out, clothing, travel and such. You can decide how much of your monthly income goes toward these kind of expenses and you can set how much to spend at any point in time. However, sometimes you will run into unexpected circumstances in which you might have to spend more than expected (like when buying a gift for someone’s anniversary for example), so you cannot always be sure of how much your variable expenses will be. The secret to get this right is to prioritize what is more important for in this list. To do so, you can create categories and play with your numbers until you find the perfect combination of what you like and what you can afford without problems.
Choose Your Tools Wisely
While you might be very comfortable listing all of these on paper for now, it will make things a lot easier for you to create a spreadsheet or to use online tools like Google Drive. There are also very complete budgeting software programs that can suit your needs. In any case, don’t feel overwhelmed when creating your budget. Simply find some tools, start creating it and use more capable tools as the need arises. In time, you will have full control of your financial life and that will help you tremendously on other aspects of your life.