Key Takeaways
- If you’re a new college graduate starting your first job, it’s important you have an idea of what your budget will be.
- Some planning now will lay the foundation for good financial habits in the future.
- Know what your income and expenses will be, so that there aren’t any big surprises down the road.
Remember when you were a kid in grammar school, you just wanted to get out of grammar school and get into high school? Then when you were in high school, you wanted to get your driver’s license. Then you couldn’t wait to graduate from high school and start college. Now it’s time to start your first job. It seems like you’re always trying to get to the next phase.
Well, this time between the end of college and the start of your first job is a time where you want to be careful in how you take those next steps. In particular, here are four financial steps to keep in mind if you’re graduating from college.
1. When your last semester starts (usually around January), put together a preliminary budget. Estimate what your income will be and think ahead to what expenses you will have, as best you can. It’s going to be difficult to do, but there are people who can help you to do this.
2. As you get closer to graduation, perhaps a month out, start looking at housing and transportation. These two expenses combined end up being as much as 40% of your income. When it comes to housing, you may want to rent a place with someone else, or you might consider living at home with your parents or other family members. For transportation, keep in mind that you may not need your own car. You may be able to get by with ride shares or by riding a bike or walking to work, depending on where you live. Do whatever you can to cut these two costs down as much as possible, and you’ll see that it’ll make a big difference for you.
3. Make sure you do this one thing, even if you do nothing else, and that’s save first, spend second. This means that you take 15% of your gross pay and set it aside into your savings. Let’s say your gross pay is $50,000. Fifteen percent of that would be $7,500. Set it aside and do not spend it. Spend everything after that, but that savings is key. This is one reason why people end up being successful with their wealth in later years.
4. Once you’ve found a job and know your income and expenses, you can take your preliminary budget and make it permanent. Take 15% off the top, then take out the cost of taxes, housing, transportation, and other expenses, and get to the point where you do better than breaking even. Having a little more money coming in than going out is important because something always comes up.
So now that we’re at that time of year where graduation season is here and new jobs are starting, give this some thought. You might be a little late, but you’re not too late to go through these steps. Until next time, enjoy.
Gary
If you’d like to read more on this topic, here are a few of Gary’s previous posts that you might enjoy: