Hey, savvy people! We have an awesome guest post to share today. Andrea Rhoades is the creator of Selfies to Selfless. In this article, she provides some great advice for Millennials on budgeting after landing your first job. Enjoy! – T$C
You did it, sweaty palms and all. You made it through the interviews and you accepted your first job offer. As a millennial, this is something to be celebrated as our generation still faces immense hurdles in terms of securing a job post-graduation.
I was you not too long ago, graduated college in 2008, right as the recession reared its ugly head. I remember the sinking feeling I felt as I realized that job offer that was dangled in front of me as incentive four years prior was not coming upon graduation.
Weeks away from beginning my first semester of a master’s program when I was offered my first job. The starting salary was much lower than anticipated but I jumped at the opportunity and accepted. But as I geared up for the move to my new location I realized my salary would not stretch very far and I would have to be careful every month just to be sure I was covering my bills.
But I also wanted to start budgeting and saving for my future. Weddings, homes, cars, kids…those all come at a cost. So through some trial and error, I learned a few things along the way to make the most of my income.
1. Track your money
This is by far the most important step to take in making your income stretch. I often hear people say they are cutting back on something to try and save more money. And that’s a great start, but they usually end up cutting back in all the wrong areas because they guess at how much they spend month to month.
So how will you know what areas can be trimmed? By tracking all of your spending, and I mean everything. I suggest creating an Excel sheet (I know, it’s the worst) and for at least three months record your transactions to get a better understanding of where your money is going.
Start with jotting down common categories in one column of your Excel sheet like rent, utilities, eating out, insurance, shopping, groceries, gifts, personal care, loan payments, etc. Any time a transaction comes through it should be recorded in a category.
In another column keep track of your income and any other money that’s coming in (even that $10 from grandma for your birthday). At the end of the month subtract what you spent from what you earned to get a bottom line of what you have left over or what your debt is.
Now before you threaten to take my millennial status away, I know what you are thinking. There are tons of mobile apps out there that can do this already, right? Well, yes and no. Apps like Mint are certainly a great tool to help you keep track of your finances. But there are nuances to how you spend your money that apps won’t catch.
For example, most apps allow you to set categories for transactions. And let’s say you set any charge that comes in from Target to go in the shopping category. That works until you go to Target and buy a gift for someone. Now your numbers are off. Plus, the apps can’t track your cash spending, which millennials often rely on.
So if you are serious about getting your true financial picture then start off tracking everything by hand. I currently use an app called Prosper Daily which has all of my accounts (credit, checking, savings) tied to it. This shows all of my transactions in one place instead of having to jump from account to account online as I organize my Excel sheet.
2. Set a realistic budget
Now that you have been tracking your money for the last few months it’s time to create a budget. Your budget is only as good as it is easy to stick to. It’s a bit like a diet. Saying you will never eat cake again is just setting yourself up for failure. So here are a few ways to set up a more realistic budget.
Perhaps you see from your Excel sheet that you spend a ton every month when you go out to eat. Bringing your lunch to work every day would probably not be a habit you could sustain for long but an easy adjustment to make could be to alter your order a bit. Perhaps switch out the iced tea for water and forego the guacamole on your Chipotle burrito.
Consider this, if you eat out three times a week and decide not to eat guac ($2) and get water instead of tea ($2) that’s $12 a week in savings. Which is $624 a year! And that’s just for lunch!
Set goals for your categories knowing you will be making some of these adjustments and try to stick to them as best as you can.
3. Start saving
Once you’ve addressed the areas that you can improve on you will start to see the extra money rolling in the positive direction. You’ll be tempted to use all this extra cash as soon as it hits your bank account, but don’t forget to start saving.
According to a 2016 GoBankingRates survey, 69% of Americans have less than $1,000 in savings and 34% have NO SAVINGS at all. When an unexpected cost comes up, say your car needs a repair, you won’t have the funds to pay for it.
Aim to save something, even if it’s just a little (like your guac savings!). It will add up over time and as you become for comfortable with your spending habits you’ll be able to add more and more to your savings.
Understanding your financial picture and establishing good spending habits is incredibly important as you officially start adulting. It may seem daunting at first, but once you get a handle on what is coming in and where it’s going out you’ll see that you really can make it work. Sacrifices in one area will pay off in areas you really care about.
Andrea Rhoades is the creator of Selfies to Selfless, a parenting blog for Millennials. She is passionate about exploring the unique challenges the newest generation of parents face. Follow her as she reveals the hopes and dreams, fears and failures of Millennial parents. Follow Selfies to Selfless on Facebook, Instagram and Twitter!