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About the Author: Carol James is an EssayLab psychology department writer and senior editor. She has MA degree in social sciences and is an excellent specialist in this field. Carol worked with numerous materials on the subject and is eager to share her knowledge with our readers.
How to start budgeting after graduating from college
After many years spent in school, and dozens of essays written, you’ve finally come to the point where you have a college degree and a decent job. It is a time for changes in your life, to start living on without the help of your parents. Entering the grown men’s world definitely sounds amazing. You still remember all those fantasies from your teenage period, which included exotic trips, expensive cars, fancy restaurants, etc. All this sound amazing, but the real life is usually about responsibility. The first thing that comes to my mind when someone mentions independent life is budgeting.
The point of budgeting is to have a sustainable financial state. To put it as simple as possible, you will have to earn more than you spend. So, you will have to use calculator pretty often, especially in first several years, when you probably won’t work in the place where an employer offers a good salary.
What are important things you should consider when making the weekly/monthly budget?
After few months of working, you will figure out how much money you bring home after paying taxes. The first thing you should do is to take a pencil and mark all the essentials. Those are usually things like apartment rents, transport expenses, utilities, groceries, etc. Some of the best tips for money saving in this area would be to find some less expensive apartment, cheaper services, and similar things. For example, you don’t necessarily need a cable TV with 500 channels or an apartment with a huge balcony. You’ll be surprised when you see how much money you could save on annual basis with these things.
The most important advice would be to stay away from debts. The importance of paying all expenses on time is great. You will not just avoid those unnecessary late fees. It is an essential thing to keep you from negative credit ratings as well. A good option to get is some calendar reminder or even to schedule automatic payments.
After dealing with all those necessary living expenses, you probably won’t have too much money left. This is the amount you can spend in any way you want. Of course, the joy of life is something you shouldn’t neglect. Spending money on the things you love definitely isn’t a waste. Still, try to find a good balance. You don’t have to spend all the money you earned last month.
An emergency fund is another thing to keep in mind. Investing in this fond will probably last for some time since you should collect the amount of money that is enough to cover at least three months of living expenses. It is hard to tell the ideal sum to put on a side. Some would say six months earnings, while someone prefers a full year of living expenses. In the end, it’s up to you.
At the age of 20, people probably don’t even think about things like retirement. Still, this would be a good time to start saving for the third age. The sooner you start – the better. In most of the cases, your employer will offer you a 401(k). If the offer matches your contributions, take it. In some way, it is actually free money.
Also, a good tip is to start investing. The sooner you start to invest in things like stocks, bonds, and mutual funds, the more time you’ll win for your earnings to grow. Of course, be careful and patient when taking such actions. A nice tip would be to find some good books about investing or to take some courses or seminars. Finally, there is a bunch of quality websites that offer free guides that explain the basics of investment. The most important thing is to set a long-term goal. Start with something simple – set some achievable goal, like saving for a new sofa, TV, or some exotic travel.
Medical insurance is another important thing that young people don’t usually consider. A healthy guy like you probably doesn’t even think about things like injuries and illnesses. Accidents happen, as well as diseases, so find some insurance that will cover at least a part of your medical bills. Thanks to the Obamacare, you will probably be able to insure yourself as your parent’s dependent, if you are under 26 and don’t have a job with health insurance. If you can’t snag into your parent’s insurance, you can always go for some short-term policy. It is a good transition solution.
Student loans are a common thing these days. According to some research, two of three students get a Bachelor degree with loans. The average student loan debt goes around 35.000 dollars, which is quite a big amount of money. My tip would be to go for the faster repayment program that you can stand. The sooner you pay off the loan, the less interest you have. Also, you’ll have extra money to invest in some other things much sooner, or you’ll simply be able to spend it on anything you want.
Finally, we’ve covered the essential thing about spending money. Don’t neglect the joy of life. Feel free to spend the money on everything you’ve ever wanted to try. Travel as much as you can, buy the clothes you like, go to fancy restaurants sometimes, etc. These experiences can’t be compared with anything else and they worth so much that you definitely can’t put a dollar figure on them. This is the true meaning of life!