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Making a Budget for Life After College

Even though I’m in denial about it right now, I will in fact be graduating from college in just a few months.

With that fact comes a lot of worry — mentally, I don’t think I’m prepared to move on yet.

But, as my mom says, the best antidote for anxiety is action, and I know there are steps I can take to make the transition easier. For one, I can at least make sure I’m in the best financial state possible.

The millennial generation takes a lot of flak for transitioning poorly into the workforce, but we don’t have to perpetuate the stereotype. Let’s be responsible by ensuring we’re in the right financial state when we strike out on our own.

Here’s how::

1. Remember we’re not necessarily in the same boat as our friends.

This realization has already been a tough pill to swallow. Several of my friends already have full-time job offers, for which they’ll be making close to six figures right out of college.

I’m proud of them, but it also means right away we’ll be in different financial positions in life. My goal is not to compare myself to them. They might be able to live a different lifestyle than I’m able to, and that’s OK! As long as I’m not trying to keep up with them, and I focus on my own situation instead of theirs, I’ll be able to stick to my own personal budget. As we like to say on Money Under 30, personal finance is personal!

2. Make sure your rent is reasonable.

Can you live at home or with family members after graduation? Can you live with two roommates instead of just one? Can you sacrifice some square footage?

These are all good questions to ask before settling on your first apartment. Believe it or not, the huge apartments we grew up watching on “Sex and the City” and “Friends” are not an accurate representation of what’s affordable right out of school (or maybe ever). Do a thorough search (either online with a site like ApartmentFinder.com, or better yet, with a realtor) before determining your best option. For most of us, housing will be our biggest expense. If you begin modestly, you can always upgrade later — a much better feeling than having to downsize.

3. Remember your student loans and other debt.

These payments come first. We’ve all heard the horror stories of what can happen when you neglect to pay these types of bills … putting them off is just about the worst thing we can do.

Being responsible doesn’t necessarily mean paying them as quickly as possible, but it does mean making them a priority.

4. Make sacrifices when necessary … but don’t be too hard on yourself.

Numbers-wise, how much should we be saving at our age?

Experts suggest a 50-20-30 strategy: 50 percent of income should go to “essentials” (bills, transportation costs), 20 percent for savings (2/3 for retirement, 1/3 for emergencies) and 30 percent for things that we want.

If you think about it, 30 percent for “wants” isn’t bad! The trick is to be conscious of how much we’re actually spending, though. You can easily go over that 30 percent with a big purchase (or more likely, with a lot of small ones), so keep track if you have to — even if that just means scrutinizing your bank statement at the end of each month.
That said, you should be prepared for the very real possibility that 50 percent your entry-level salary may not cover all the essentials. That may mean sacrificing some of your “wants”, or finding some side income the first few years on your own.

We can start this mentality in the months leading up to graduation, as well. It’s tempting to throw caution to the wind and blow our remaining savings while we can, but college isn’t our last chance in life to have a good time.

If you can save even $1,000 by skipping that extra cocktail every now and then or cooking at home more, those savings could be a deposit on an apartment or new clothes for work you won’t have to put on a credit card.

Having a little cash in the bank sounds like fun to me.

Published or updated on February 15, 2013

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About Maria LaMagna

Maria LaMagna is a recent graduate of Northwestern University where she served as editor-in-chief of the university’s award-winning daily newspaper and studied for five months in Argentina. Before joining Money Under 30, Maria worked as a reporter for CNN and the Indianapolis Business Journal. Follow Maria on Twitter @MCLaMagna.


We invite readers to respond with questions or comments. Comments may be held for moderation and will be published according to our comment policy. Comments are the opinions of their authors; they do not represent the views or opinions of Money Under 30.

  1. Drew says:

    A good rule of thumb is to ease into your new life style. What I mean is to take it easy with the spending until you a few paychecks and a few month of essential expenses under your belt. Your salary on paper always looks bigger than it will feel each month. You have to remember that taxes, insurance co-pays, and 401(k) contributions are deducted from your paycheck. So take it easy on the spending until you get a good feel for how much you are actually bringing home each month and how much your essentials cost you. Then you will know for a fact how much disposable income you have each month. Once you know that, you can set up your saving and spending budget. It’s a lot easier to plan a budget off of real data instead of estimates.

    We all know the temptation that that first ‘real’ salary creates. We want to go buy everything we have ever wanted since we aren’t poor college students any more. We also know that we tend to be overly optimistic about how much money we really take home and how far that money goes when you have adult expenses like taxes and insurance. So, be smart and dive in head first, check to see how deep the pool is first, or you might end up with a real headache on your hands.

  2. Bonnie says:

    I think making a budget is a difficulty to me… But I have to do this. whatever, it is a good thing to save some pennies..

  3. Bucksprout says:

    Number 1 is very important. Everyone’s situation is different. If compare myself to my friend who works at Yahoo! I would be very sad. Instead I should be happy for him and ask him if I can come by for lunch (Yahoo! has an amazing lunch and breakfast, employee perks) Number 2 is critical. The Bay Area is expensive. I don’t live in San Francisco or Mountain View because rent is unrealistic for me. Living in San Jose allows me to explore San Francisco and have fun. If I lived in San Francisco I wouldn’t have enough money to explore the city.

  4. Points two and four I’m working hard on this year. Not living the most desirable neighborhoods here in NYC will allow me to save a lot more each month. Even though I could afford to, it just isn’t worth it. Short term sacrifice for long term gain. It’s also very important not to compare yourself with others, which is difficult at times, but I do my best to stay in my lane.

  5. Great common sense advice, especially items 1 and 4. When people graduate and get their first “real” job they tend to go crazy. Living nickle rich but they are still technically penny poor due to student debt and possible credit card debt.

  6. I think number 1 is really important. It’s so crucial not to “live beyond your means” and try to imitate the lifestyle that you see others having. Just be mature about it and enjoy what you have or you could easily end up in trouble!

  7. Rose says:

    Making a budget for life after college. this title attract my eyes. well I am a college student,after reading this article, i guess i know what i should do now. Thank you ,dear author.

  8. Watson says:

    Great write up, I particularly like #1 and 2.

    It can be hard for some to realize we don’t all make the same income. This can be stressful when constantly having to turn down offers to go on trips or dining out at nice places. Definitely need to evaluate when you can spend on these wants.

    Finding reasonable rent is a must. I have lived in several different cities/countries. Researching online will provide a good base. If you can, ask peers living in the area suggestions.

    – Watson

  9. Alex says:

    To expand on point #3, don’t forget about your loans during your 6 month grace period! I would recommend figuring out what your payments will be after the grace period, and making those payments to your savings account, on top of your regular savings, until it’s time to start paying your loans back. That way it won’t be a change to your disposable income once repayment starts, and you should have decent start on your emergency fund.

    I was fortunate enough to live with a family friend rent free for a few months right out of college when I started working, and was able to save a good amount during that time. I then moved and started paying rent at the same time my loans came out of grace, but did not make the necessary adjustment to my spending. I slowly watched my savings drain over the next few months until I was able to readjust my spending habits and get back on the right track.

    • Mattie says:

      Alex, that is a great idea! I wish someone had suggested that to me when I graduated… that 6 month grace period can set up some pretty unrealistic expectations.

  10. Kretek says:

    The apartment thing…yes. I pay $920 in base rent when I didn’t need to. Instant regret. Get a roommate.

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