Managing money at an entry-level salary

You’ve landed your first job after graduation — congratulations! Now that you know what your initial salary will be, you can build a realistic and sustainable budget that’s based on your take-home pay. This new budget might look a little different from the one you used in college — so, to get you started, we have three tips that will help you create a budget based on your entry-level salary.  

Financial confidence, here we come. 

Tip #1: Make a list of necessary expenses

First things first: You need to know how much you spend on necessary items each month. This includes essentials like rent, utilities, groceries, student loan payments, car payment, etc. — anything you absolutely need to run your home and maintain your job. As you make a list of these expenses, pay close attention to things that may have been covered during your time in college but will now be your responsibility.

For instance, if you had grants or scholarships helping support you in college, make sure you account for the expenses those funds helped cover. And if you lived on campus during college, your utilities likely were included in your room and board, not separated out in your college budget. Now, they will be individual expenses you need to plan for.

By taking a line-by-line approach to your budget, you can make sure you’ve broken out any expenses that may have been rolled up into your college tuition. Other expenses that are easy to overlook are things like water, sewer service, trash pickup, natural gas, pet care, insurance, transportation, etc. These could vary depending on whether you rent or buy and whether you live in a house or an apartment, but they’re worth investigating for your post-grad budget.

Tip #2: Make savings mandatory

You should consider it a necessity to build your emergency. If you had an emergency fund in college, great! You’ll probably want to increase it now that your budget is different. If you didn’t have an emergency fund in college, no regrets — just start one now. Every little bit helps.

Also prioritize your retirement savings. Directing more than the minimum contribution to a retirement account like a 401(k) or IRA can help you take advantage of time as an investment tool. The earlier you start investing in a retirement account, the more time those investments will have to grow.

Tip #3: Consider your wants  

Once you know how much money it will take to cover your necessary expenses, you can start adding some wants to your new budget. These are things that you’d ideally like, but aren’t required. Expenses that fall into this category are things like eating out, coffee breaks, concert tickets, new clothes, and travel.  

With this category, it’s also important to identify upgrades or enhancements to your necessities that you would like to have but, again, aren’t necessary to live. For instance, your cell phone plan. Of course, a cell phone is a need, but you don’t necessarily have to have an unlimited data plan. Along those same lines, maybe you prefer to get your groceries at a boutique grocery store but could find a more affordable alternative somewhere else. Those distinctions also fall into the “wants” category because, if push comes to shove, you could adjust your budget to lower those costs. 

While your emergency fund falls into the need category – any additional you save beyond that is considered a want. For instance, if you’re saving for a trip or planning to make an expensive purchase in the near future – that is all savings that goes above and beyond the money you’re putting away to cover an emergency. Set a minimum amount you will save every month no matter what – and anything above and beyond your necessary emergency fund. You may want to set a minimum amount to save every month no matter what to fund unexpected “wants.”

Tip #4: Start a side hustle, if needed

To keep a full picture of how you’re spending and saving money, make sure to track your income versus your expenses each month. This will help you make adjustments to your budget and give you a more accurate estimate of your spending going forward.

If you find that your expenses are adding up faster than expected and you need additional money to cover your wants, consider picking up a side hustle in your free time. It can increase your income, help you steer clear of credit card debt, and help you get an edge in the job market as you build skills and experience that can boost your market value.