Budget for First Job Out of College

by | Jun 14, 2022 | Knowledge Center, User Guides | 0 comments

People think that once college is over, life will be easy for them, and they will experience ultimate freedom. Little do they know that very soon, the shackles of the corporate world will bound them, and more considerable challenges will be waiting for them. Getting your first job is exciting for every individual. It is your first step toward your professional life. You are no longer a carefree college student dressed in his tees or sweatshirts. Now you have grown into a mature adult dressed in formal who has a lot of new responsibilities on his head.

While this transition is fascinating at the same time, it’s very sudden. Most students are not prepared for that and soon start hating their job. According to the US Bureau of Labor Statistics, 55.3% of college graduates leave their first job within the first year. In comparison, there are multiple reasons behind this statistic and behavior. The most logical explanation is your pay.

When college students receive their first paycheck, it forces them to reconsider everything. They often ask themselves if this is what they will be getting after so many years of studying and working tirelessly for a whole month. This question makes them hate their first job.

What to do with your first paycheck

first job paycheck

Now let’s be honest, you can’t expect to receive a fat paycheck in the first month of your first job. You have to wait and work hard for a few months to increase your pay, but life and the government will never wait for you. You have to pay for everything in that paycheck, and if you create a reasonable budget, you’ll be able to survive and maybe thrive in those months. Once you learn the art of creating a reasonable budget, it will help you throughout your life.

Splurging the salary of your first job:

first job splurge

Most people feel burnout and exhausted after the first few days of their first job. As soon as they get their first salary, they start splurging it without thinking about the time and effort they put into earning it. This vicious cycle continues, and they never learn to save and budget. While often, millennials try to shrug off this irrational behavior in the name of “treating yourself” and “living in the moment.” Deep down, they regret this behavior, making them anxious and self-conscious.

More than 41% of our Millenials feel anxiety when they think of their finances, and 30% feel self-conscious about them. Around 72% of people in their twenties believe in some regret after spending money on themselves. More than 50% of people face this regret after spending on food like food delivery, dining out, and take-away food and drinks.

These stats are sufficient to prove that the money that was once spent in the name of enjoyment and living in the moment is not bringing any long-term happiness. Instead, it is creating negative emotions within them.

Saving and budgeting are the solutions to this problem:

The best fix to this problem is to create a budget and stick to it. In contrast, social media has convinced us that spending money will make you feel better. In reality, saving money makes people feel delighted and relaxed. According to a survey, 84% of people said saving money gives them more happiness than eating good food, exercising regularly, and having their ideal job.

To save money, you must keep a budget and stick to it. Most people in their twenties consider budgeting a dry and dull concept and face problems in creating a budget and sticking to it. Most of them end up spending on unless stuff, and later they regret doing that. The main reason behind this is not creating a proper budget. If you learn adequate budgeting during your first job, then sticking to a budget at any age will be a piece of cake for you.

Benefits of creating a budget:

Before learning how to budget your first salary, let’s examine the benefits people get after creating a budget and sticking to it. Almost 70% of Americans reported they maintain a budget as per a 2019 survey that had more than 1000 participants. After the pandemic, this survey was conducted again, and this time 82% of Americans said that they keep a budget.

Inflation and pandemic acted like two eyeopeners for people and people realized how unpredictable the country’s financial situation can be. Some people started budgeting after seeing its benefits. Out of all people who said that they keep a budget, 85% said that keeping a budget keeps them away from debt or has taken them out of debt.

How to create an early career budget

first job budget

Since it is your first job and you are new to the working world. Here are some simple and effective ways to create an early career budget that will help you in keeping your finances on track.

Create a Budget for Less

Most people are unaware of this fact during the first month of their first job that they will not be getting the exact salary they were promised while getting hired. Some part of that salary goes to the student loan, taxes, medical insurance, etc. So keep that in mind before creating a budget and budget for a less amount of money.

Prioritizing Your Expenses:

Make a priority list of all your expenses and then you can tackle those expenses with the famous 50/20/30 method where

  • 50% of salary goes towards their essentials and non-negotiable expenses like electricity bills, groceries, house rent, etc
  • 20% of your salary goes into saving
  • 30% of your salary goes for your personal expenses

Since everything is now sorted, you can spend that 30% on stuff you like. But we highly recommend you to spend some part of that 30% on pure entertainment and some part of that on more meaningful things that can later turn into your asset.

An asset can be something physical like a car, house, investment in a company or it could be investing in yourself like learning a new skill, etc. Most likely the 30% of the salary of your first job will go to treating others or treating yourself but no issues as it is well deserved.

Create a spreadsheet for your first job:

Most people do mental budgeting and never write it down. Even though mental budgeting is still way more effective than no budgeting. There are high chances that you will forget all the expenses and savings. Writing anything makes your brain retain it more. You can write it using pen and paper but still, there are chances that you can lose that particular piece of paper. Plus people who are not good at maths can easily get a headache after calculating all those expenses.

It is best to create a first job budget spreadsheet and note down all your financial information on that. Write down all that you have earned, spent, and saved. List every cent you spent and this will help you a lot during your first job. It will give you a detailed insight into your main expenses and spending habits. Once you get a hold of that you can go towards mental budgeting.

Save for retirement

How many times do we find ourselves thinking about getting an early retirement and living a carefree life? Most people are unaware of the fact that millennials need more than $2 million to retire to live a good life. The most shocking thing is that more than 20% of Americans have no retirement plan and more than 30% have saved nothing for retirement. Around 70% of American plans to continue working even after passing the age of retirement and around 30% are already doing this.

These stats show how important it is to save for retirement and as soon as you land your first job you should be saving for your retirement unlike 28% of millennials who think that it’s unimportant to think about retirement.

Pay off your debts

If you have taken any debt like a student loan or any other loan start paying it off as soon as you land your first job. Almost 40% of student loan borrowers are not making any payments to pay off their debts and it can be a huge problem for them as they have to pay off the debt anyhow but delaying it will only increase the added interest on that. If you pay off all your debts at a young age then you will live a carefree life ahead.

Last words

Landing your first job is a dream come true for every student but this dream can soon turn into a nightmare if your finances are not managed properly. Keeping a budget and spending according to it will help you a lot in experiencing true financial freedom. Even though social media has tricked us into believing that spending money will make you happy. In reality, it is just immediate gratification. Some people land a union job straight out of college, but this does not mean that you stop saving for your dreams.

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