Springtime means the school year is coming to a close, and thousands of college graduates are facing the real world, ready or not. “Adulting” can be a challenge at any age, so recent grads should remember that they are new at this, and like all things in life, practice makes perfect. Consider these tips when it comes to handling your money like a responsible grown up.
After you’ve landed your first post-college job, it’s time to set a realistic budget. Don’t set a budget based on your pre-tax salary figure. Instead, the number you see on your pay stub is what you should base your budget off of — this is your actual take-home pay. Welcome to adulthood.
When you’re ready to create your budget, you can take advantage of numerous apps and computer programs, or you can grab a trusty yellow notepad and pencil. Start by tracking your monthly expenses, including rent, food, utilities, insurance and student loans. Take one month to be fastidious about recording where every dollar goes. You may find that you don’t use all of the services you pay for each month, like music subscriptions, streaming services and cable, and that is a great place to start trimming your spending. All those small charges add up.
Next, consider dividing your spending into three categories. Some people have suggested a 50/20/30 approach, where 50% of your income goes toward monthly expenses, 20% is for saving, investing and paying down debt, and the remaining 30% is for discretionary spending—things you don’t necessarily need but want, like movies and eating out with friends. One size doesn’t fit all, so you may want to tweak the percentages, but dividing your spending into those three buckets—essentials, financial goals and flexible spending—is a great way to enjoy life today while staying on solid financial ground for tomorrow. Financial responsibility is a life skill you can absolutely master while you are young. Do yourself a favor and create healthy habits.
The information on this page is provided for educational purposes only and is not tax, legal, financial planning or investment advice. Neither the information nor any opinion expressed in this section constitutes an offer to buy or sell any securities or advisory products. The information provided is general and is not information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security. You should not regard this information as a substitute for the exercise of your own judgment. Investing involves risk.