{"id":201363,"date":"2015-10-08T04:00:19","date_gmt":"2015-10-08T11:00:19","guid":{"rendered":"http:\/\/getrichslowly.org\/blog\/?p=201363"},"modified":"2023-05-22T22:46:49","modified_gmt":"2023-05-23T04:46:49","slug":"money-moves-for-graduates-how-to-set-up-a-budget","status":"publish","type":"post","link":"https:\/\/www.getrichslowly.org\/money-moves-for-graduates-how-to-set-up-a-budget\/","title":{"rendered":"Money moves for graduates: How to set up a budget"},"content":{"rendered":"

If you are a recent graduate, congratulations and best wishes for your success!<\/p>\n

Whether you were lucky enough to have a job lined up right after completing your degree or not, whether you graduated without student loan debt or your new balance rivals the national average of $30,000, you still need to get your financial life in place. So now that the celebrating is behind you, it’s time to get to work. What are your next steps?<\/p>\n

Here’s a primer to get you started.<\/p>\n

<\/span>Start With a Simple Budget<\/span><\/h2>\n

A budget is a money plan. It’s the most important thing you can do with your money. There are a lot of different budgeting methods; but at Get Rich Slowly, we find that it’s often easiest to think in broad strokes at first and then work your way down to the specifics, especially if you’re a budgeting newbie. We’re pretty fond of the Balanced Money Formula<\/a> (BMF) for this reason, because it’s really easy. Here’s the basic idea:<\/p>\n

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Simple, right?<\/p>\n

But what if you don’t have a job yet? How can you plan a budget if you don’t even know how much income you will have coming in? And suppose you’re fortunate enough that your parents are letting you crash with them while you get on your feet? How should you be allocating your funds in the meantime?<\/p>\n

Good questions! Let’s break it down a bit, shall we?<\/p>\n

<\/span>How Much Money Will You Really Make?<\/span><\/h2>\n

Hopefully you graduated with some clarity about the type of job you wanted — and even more, hopefully your major and other scholastic activities, like internships, actually prepared you for that career path. The Bureau of Labor Statistics Occupational Employment Statistics<\/a> is a great source for figuring out what industry your degree prepared you for, what the entry-level jobs are in that industry, and how much those jobs pay.<\/p>\n

Here’s some sticker shock for you, though. That BLS figure doesn’t accommodate for things like health insurance, social security taxes, federal or state taxes. Here’s how to figure out what you’re really likely to bring home:<\/p>\n

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<\/span>How to Determine Your Proposed Monthly Income<\/span><\/h2>\n
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    \n
  1. Take the average entry-level annual salary in your proposed field.<\/li>\n
  2. Divide by 26, which assumes you get a paycheck every two weeks.<\/li>\n
  3. Now take two-thirds of that amount. (That’s a ballpark estimate of what your take-home pay could be after all deductions.)<\/li>\n
  4. Multiply that by two. (Yes, you’ll have some three-paycheck months; but generally speaking, there will be two).<\/li>\n<\/ol>\n<\/div>\n

    That’s it, folks — a fairly reasonable guess at what you can expect to be living off of each month even if you don’t have an actual job yet.<\/p>\n

    <\/span>An Example of Income<\/span><\/h2>\n

    Now that we have a basic idea of what you’ll have to work with, let’s take another gander at the Balanced Money Formula. This might be easier to visualize with some hard numbers, so let’s assume that Graduate Bob is making the average salary for an individual with a bachelor’s degree.<\/p>\n

    According to the National Center for Education Statistics<\/a>, “In 2013, median earnings for young adults with a bachelor’s degree were $48,500.” So using the formula above:<\/p>\n

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    <\/span>Sample Income Calculation<\/span><\/h2>\n
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      \n
    1. Average entry-level salary = $48,500 per year<\/li>\n
    2. $48,500 \/ 26 = $1,865.38<\/li>\n
    3. $1,865.38 x 0.67 = $1,249.81<\/li>\n
    4. $1,249.81 x 2 = $2,499.61<\/li>\n<\/ol>\n<\/div>\n
      \n

      Let’s call it $2,500 for easy math. That’s what Graduate Bob has to spend on wants, needs, and savings each month.<\/p>\n<\/div>\n

      <\/span>Extrapolate Amounts for Other Categories and Establish Goals<\/span><\/h2>\n

      Armed with an estimate of monthly income, you can then extrapolate amounts for each of the other aspects of the Balanced Money Formula budget. Let’s look at how that works.<\/p>\n

      What Are Needs?<\/h3>\n

      The Balanced Money Formula identified that needs are things you must<\/em> pay no matter what:<\/p>\n

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      <\/span>List of Needs<\/span><\/h2>\n
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