As you move the tassel on your cap from the right side to the left on graduation day, it might feel like just yesterday that you were setting foot in your first college class. Moving the tassel at graduation is a right of passage – it signifies successfully completing the requirements of your degree, beginning a new chapter in your life, and hopefully starting to receive a steady paycheck. Although creating a plan for your new post-grad income and the expenses that come along with it, might seem overwhelming – it is a practice that will lay the groundwork for continued financial success. Here’s how you can create your first post-college budget to help you stay on track, reach your monetary goals, and feel confident about your financial future.
Step 1: Look at Your Paystub
When you accepted your first job offer, you were likely told a gross salary or hourly wage that you could expect to receive. The keyword is gross – that is, the amount of money you earn before any deductions are subtracted. The amount that you make and the amount that will be deposited into your bank account are two very different things. Your pay stub should break down every item that is taken out of your gross pay. Some of those items are taxes, social security, and health insurance premiums. It’s a good idea to look at your paystub from time-to-time to ensure that everything you don’t see in your bank account looks correct.
Step 2: Identify Your Monthly Take Home Pay
Once you’ve found your way out of the “deductions jungle,” you will arrive at your net or take home pay. If this isn’t the first paycheck you have received from this employer, this number should look familiar – it’s what gets deposited into your bank account every payday. If you are paid semi-monthly (the 1st and 15th or the 15th and last day of the month), you can multiply this number by two to get your monthly take home income. If you are paid bi-weekly, you can generally do the same – though there are typically two months a year in which you will get three paychecks.
Step 3: Figure Out Your Fixed and Variable Expenses
There are various factors that will impact what your fixed and variable expenses are as a recent graduate. Will you be living with your parents, living with a roommate, or living on your own? Are you expected to be working in-person or remotely? Do you have student loans? Fixed expenses are those that are predictable in frequency and cost and can include rent/mortgage, student loan payments, insurance premiums, and phone bills. Variable expenses are those where frequency and cost change based on your consumption or usage and can include utilities, groceries, entertainment, and gas. Expenses can be necessary, necessary periodic, and optional. While a vet bill for your sick puppy might be a necessary periodic expense (you aren’t expecting your puppy to get sick regularly), a concert ticket is probably optional (yes, even if you have FOMO). Make a list of your necessary fixed and variable expenses, as well as what their costs might be, to begin constructing your budget.
Step 4: Crunch the Numbers
Subtract all of your necessary fixed and variable expenses from your monthly take home income. One of two scenarios will be true – your expenses will cost more than your income or you will have extra money after your necessary expenses are paid. Ideally, we hope that your situation is the latter. If your expenses cost more than your income, you will want to consider ways that you can cut expenses, find a part-time job, or start a side hustle to bridge the gap. If you have money leftover after your expenses are paid, consider some of your short and long term financial goals. If you don’t have an emergency fund, which experts recommend should cover approximately 3-6 months of living expenses – that’s a good place to start.
If you’re looking for a straightforward budget that breaks down your monthly income and expenses, check out our fillable budget worksheet.
New Expenses to Expect After College
If you recently graduated and are looking at your budget wondering where all of the expenses are – don’t worry, they’re coming. On a more serious note, there will be new expenses that you can expect to appear now that you are out of college. If you took out student loans, you may have to begin repayment in the months following graduation depending on your situation and your lender. If you shared a family car or didn’t have a car in college, you may be considering an auto loan or lease to have reliable transportation to and from your job. If you haven’t started saving for your retirement, your first job is an ideal time to start – so that you make saving for your financial future a habit early on.
If you’re in Monmouth or Ocean Counties in New Jersey and finding a reliable financial institution to bank with is on your post-grad to-do list, consider a credit union like First Financial. Becoming a member is as easy as depositing $5 in a base savings account and entitles you to a wide range of financial solutions from low-rate loans to everyday checking accounts – all equipped with personalized service.*
*A First Financial membership is required to obtain any account or loan and is available to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties. See credit union for details. A $5 deposit in a Base Savings Account is required to establish membership prior to opening any account/loan.
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