Starting your first job after college is an exciting time. You’ve been living on a tight budget of ramen noodles packets for four years, and now you can upgrade to a real ramen shop. But don’t get too carried away; otherwise, your monthly expenses can end up more than your income. If you have good budgeting strategies, it will ensure that you have money left over for your important financial goals.
How to Live On a Budget
It’s ideal to have an income management system when you first start working. The habits you’ll form will stick with you for a lifetime. You might have grown up with a family budget that introduced you to the idea of budgeting. Creating a personal budget will help identify areas you can reduce monthly expenses and save for emergencies, retirement, and other goals.
Creating a Personal Budget
A budget will tell you how to save money from salary. When you know how much money is coming your way, you can control where it goes. Use a personal budgeting software to help track your spending.
What Is the Best Budget Planner?
If you grew up with parents who kept a family budget, they might have kept a notebook that kept track of everything. Nowadays, you can download plenty of apps, so you have access to your budget on the go. This app certainly makes it easier to keep it updated. There is no one best budget planner out there that works for everyone, though. Here are few to try out and see if it works for you:
- You Need a Budget (YNAB)
- Personal Capital
Budgeting Strategies for New Employees
When you’re learning how to manage money from working, there are some ways you can make it easier. Income management is all about making your money work for you. Here are some tips on how to live on a budget with your first job.
Live Below Your Means Is the Best Budgeting Strategies
This statement doesn’t mean going back to living on a tight budget as you had in college. Consider ways to drop your expenses so that you can splurge later when necessary. Get a roommate, go with the moderately priced apartment, work a part-time job, shop for groceries at a value retailer for examples.
Pay Yourself First
Have a specified amount automatically transferred to savings every time you get paid. This method makes it easy for you, and you won’t miss what you don’t have in your account.
Get Rid of Debt
Before getting married, having kids, and other milestones happen, pay off as much of your existing debt as possible. Don’t just pay the minimum balance. Use the avalanche, snowball, or another method of paying off debt to focus on this goal.
Start Your Emergency Savings
You never know when your car might break down, or a medical emergency could happen. So when you’ve started your new job, start putting some cash away for a rainy day. Have a goal of saving at least three month’s worth of salary, then extend that to six months.
Planning for The Long-Term
After you know how to save money from salary, it’s time to work on longer-term goals. It seems far away when you’re starting. But the years will pass before you know. Plus, using the time value of money, the more you save now, the better off you will be.
Establish a 401K
Many employers offer a 401K as an employee benefit. Make sure that you sign up for it. Some employers will offer an employer match. You should allocate at least the amount that they match to maximize your return.
Look Into an IRA
Roth IRAs and traditional IRAs provide different tax benefits that you should take advantage of now rather than later. Even if you can’t max out the yearly amounts, starting one sooner than later is recommended. Research the differences between the two types of IRAs to determine which one would be best for your situation.