How To Survive Real World Budgeting For The First Time

by Connie Mei · 4 comments


One of the most exciting times of everyone’s life is entering the real word as a young adult. Finishing school, getting that first full time job, and venturing out on your own is always an important milestone everyone remembers. It signifies the start of adulthood and finally not being “a kid”. However, for many, the excitement wears off pretty quickly and you then get hit with one of the harshest realities of being an adult: managing your own finances.

Why is it so hard?

Budgeting and learning how to spend your money wisely for the first time is a challenge for everyone. And you’re bound to make mistakes. To make your transition easier, here are four tips to help you survive budgeting in the real world for the first time:

1. Know Your Take Home Income

When you get your first job, you will get a salary offer. Let’s say you’ll be making $20 an hour or roughly $40,000 annually. Does that mean you’ll be taking home a little over $3,300 a month?

Wrong!

When you get your first pay stub, you’ll see that many expenses are deducted from your paycheck, such as state and federal taxes, social security income, and health insurance (just to name a few). This can take up a very large percentage of your gross pay, on average 25%. It’s important to know what your true net or take-home income will be so that you can properly budget.

budgeting for graduates2. Understand All Your Expenses

Living away from your parents for the first time can be a real eye opener. You start realizing how many things you actually need to pay for that you didn’t necessarily think about before. Make sure you really understand what all your expenses will be, from the big items, like rent, all the way to the little things, like toilet paper. If you’re trying to figure out how much to spend on rent, a good rule of thumb is 30% of your gross income, but that also depends on where you will be living. If you’re in a big metropolitan city, that number could be a lot higher.

Also think about your food costs, which will probably be your second biggest expense. If you’ve never had to do grocery shopping before, a good first step is to just hit the grocery store with a list of necessary items you need to buy weekly. Get a gage of how much everything costs so that you can better budget for this in the future. Remember, all the little things add up so make your budget as detailed as possible.

3. Be Organized, Track Everything

One of the most important things about managing your finances successfully  is organization. You simply just need to track everything very well. Once you have that down, you’ll have an accurate snapshot of how you’re spending and what you should cut back on. Many people forget the little things, like your daily cup of coffee, but a small expense like that can actually add up in the long run.

Make sure you’re keeping track of everything. The easiest way to do so is by starting a spreadsheet where you input your expenses. Tools such as Mint.com are also great to use because you can integrate it with your bank and credit card accounts to help you track your purchases.

4. Save, Save, Save

Being on your own for the first time is really exciting and there will be an urge to do everything and spend on everything. But remember that it’s important to live within your means, because not doing so will get you in a lot of trouble down the road. Start good financial spending habits now. Have a small budget for discretionary spending, but for the most part: save, save, save.

Start an emergency fund as soon as possible—because you truly never know what can happen in life. It’s also never too early to start thinking about retirement. With the power of compound interest, the earlier you start saving for retirement, that more you see later on.

Money Saving Tip: An incredibly effective way to save more is to reduce your monthly Internet and TV costs. Click here for the current AT&T DSL and U-VERSE promotion codes and promos and see if you can save more money every month from now on.

{ read the comments below or add one }

  • DNN says:

    I know struggle and hardship. Sometimes you gotta hit rock bottom to discover your true potential before becoming an online millionaire.

  • DNN says:

    I have to admit I’ve made tons of mistakes in the past with money. I was young, unlearned about the importance of saving money, and like most people, I too am guilty of thinking in the moment when I had money and spent it all up with nothing to look forward to. With a renewed outlook on life and finances today, I’m striving for excellence to get organized completely across the board. And I’m looking forward to achieving “side hustle millionaire” status in the next 2 years and be a testimony to others that no matter how hard the struggle, trust the LORD and you too can rise to greatness! 🙂

  • freebird says:

    A couple of pointers from a middle-aged guy who reached financial independence (meaning I can live off savings alone for the rest of my life) by age 40:
    (1) prioritize your expenses– top items include starting your 401k with contributions at least equal to your employer match and putting the max into your Roth IRA. Unlike income taxes, FICA, and health insurance, these “deductions” are totally on you to set up. Don’t make the mistake of assuming that since the default is zero for these, that you do not need them.
    (2) understand that what you can safely spend for living expenses is less than you imagine when looking at your W2 topline. For example I think 30% of gross income for rent is too high– find cheaper accommodation or double up with a roommate. Similarly I wouldn’t buy a car that costs more than three months of gross pay. That last sentence in the article is critical– anything spent today loses the power of compounding so what you buy today costs a lot more in future retirement dollars.
    (3) saving extra $$ is far from useless– anything extra you put aside now means reaching the finish line (freedom from having to do work that you might not enjoy) earlier. If things fall apart in the future, your nest egg is a your safety net. If things look great in the future, your nest egg allows you the option of taking on high-risk/high-reward opportunities.

  • It has been proved that expenses will normally grow to the level of income. That is true. However, with good budgeting, one can curtail his spending. It is not even enough to save. One needs to invest. One can start with mutual funds and later start investing in stocks

Leave a Comment