5 things recent graduates should know about budgeting
You’ve just graduated college, congratulations — that’s huge! But, there’s something you absolutely need to know. It’s a secret that will easily set you up for success in life.
No, they don’t teach it in college, and you might not have learned it at home either. In fact, it’s often frowned upon as a boring topic for finance nerds. So, what is it?
It’s the practice of budgeting. And if you can master it, you’ll be well on your way to success. Here are five things you need to know to get there.
1. Budgeting doesn’t happen by itself.
In college, you can often get by without much planning. Whether you’ve got a term paper you’ve had 12 weeks to write coming due or a calculus exam the next day, pulling an all-nighter can be an adequate solution.
But life post-college doesn’t work that way. For most worthwhile efforts in life, you’ll need to put in the time. And budgeting is no exception.
It isn’t really something you can decide to do today and then ignore for months on end before starting it up again. You have to be fully committed to the process.
So, how do you get started?
One approach is to use apps including Mint or You Need a Budget. Or, keep it basic, and just use pen and paper or a spreadsheet.
Deciding on whether to you an app or not really depends on your style. When selecting an app, you want to consider how easy the user interface is to use and how well it connects (and stays connected) to your bank accounts. While these two considerations may seem minor, they can make all the difference with whether or not you stay consistent with using the app.
If you decide to use pen and paper or a spreadsheet, be sure to include columns to track your spending categories, your budgeted amount for each category and your actual spending. It will also be help you if you add a section to highlight your expected and actual income so you know what you are tracking against.
2. You’re not going to be perfect at it — and that’s OK.
Shooting for an A+ on budgeting? Chances are, you won’t always get there — and that’s OK.
Budgeting is a marathon, not a sprint. Some months you’ll go over, others you’ll be way under, and some you’ll be right on target.
The key to the process is to be kind to yourself. The best and healthiest way to approach it is to treat it as you would any new habit. Habits take time and practice. Budgeting is no different.
It takes time to learn what type of budgeter you’ll be. Do you like a daily rhythm? Weekly? Monthly? Do you prefer handwritten or electronic? Personal finance app or Excel spreadsheet?
Being able to answer these questions will help you fine tune what budgeting method will work best for you. My suggestion would be to try out a couple apps and even pen and paper for a week at a time to see what would work best for you before making a final decision.
Set a reminder on your phone or calendar to check in on your budget and then adjust accordingly based on what’s easiest to do but at the same time remaining consistent.
Once you’ve got that bit figured out, you’ll need to give it some practice. If something isn’t working quite right for you, don’t be afraid to pivot.
Some other methods to consider include:
- The 50/30/20 budget: This simply splits your budget into 50% necessities, 30% things you want, and 20% to debt and savings. This method is perfect for beginners. That being said, you can customize your percentages based on your priorities and goals. For instance, you might decide to put 30% to necessities and 50% toward debt and savings.
- The envelope method: If you want a foolproof method, you won’t go wrong with cash envelopes. These let you set expense categories and store cash for each line item in an envelope. If you choose to use this method, be sure to keep your envelopes secure.
3. Budgeting could save you thousands in your lifetime.
It’s no secret that the levels of personal debt are astronomical. A budget will be a key ingredient to getting out of debt. It will help you get a full view on your finances and reach your financial goals. A budget can save you thousand because it will keep you mindful and intentional about your spending. It can also help you reallocate any extra funds you have towards paying down your debt as opposed to letting it slip through your fingers unknowingly.
4. You can have fun with it!
Like any new habit, a key to sustaining it is having fun with the process. Budgeting is no different. How do you make it fun? One thing you can do to make it less tedious when it comes to budgeting is to call your budget something fun. Who says a budget has to be called a “budget?”
You can have a friend keep you accountable by sharing your budgeting goals with them and checking in with them once a week. If you are going the pen or paper or spreadsheet route, you can make it fun and colorful and even add quotes to keep you inspired.
About the Author
Bola is a Certified Financial Education Instructor (CFEI), finance expert, author, speaker, and founder of Clever Girl Finance, a financial education platform and community for women empowering them to achieve financial wellness and live life on their own terms. Clever Girl Finance is one of the largest personal finance platforms for women in the U.S. In addition, Bola and Clever Girl Finance have been featured by several media outlets including Time.com, Money Magazine, CNBC, Forbes, Fast Company, Essence, Black Enterprise, Cheddar TV, ABC News, Good Morning America, Fox Business and The Chicago Tribune as well as on several other finance websites and podcasts.
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