Graduating? Make a Budget Without Hurting Yourself

This article is part of a series called Graduating? which focuses on personal finance advice for fresh college grads.

I hate the word “budget.” Not because I think budgets are bad, but because of the images that the word conjures. A massive spreadsheet with dozens of categories, and the whole thing is just yelling at you, telling you all the things you can’t spend money on. Of course, a budget doesn’t have to be like that, but that’s what people think of – which is why I refuse to call what I do “budgeting.”

Still, if you’re leaving the hallowed halls of academia, and entering into “The Rest of Your Life,” you’re probably thinking that you need a budget right about now. But… uh… where do you start?

Give Yourself Time

No one says you have to come out of the gate with a detailed, perfect budget. In fact, I don’t think you should even try at first. Instead, take 6-8 months and just track how you spend your money – every penny. Let your instincts guide you.

Don’t make any major purchases during this tracking period. Why? A few reasons: first of all, how will you know what your typical spending is if you’re making a bunch of extraordinary, one-time purchases?

Secondly, it’s just smarter not to blow your money yet. A lot of people sign on to a new real-world type job, and they run out to buy a brand new car and fill their apartment with expensive furniture – thinking they can “afford it now.” But how do you know that until you know what your expenses are? Once you’ve got a handle on what you spend on food, entertainment, utilities, and all of the other basics, you’ll know what kind of monthly payments you can afford.

And as a side note on the furniture, you don’t want to drop a ton of money on stuff for an apartment that isn’t going to be your end-all-be-all living space. What if that giant bed or kitchen table you buy don’t fit in your next place? Just get the basics, and get them from Craigslist or Freecycle.

Find Something That Works

Everyone has an opinion on how you should budget – but all that really matters is that it’s something that works for you. Just remember, budgeting is just continuing to track what you spend, but now doing it with goals and targets in mind. There’s a lot of free software to do this, so I suggest you try out all of the free stuff before you plop down any cash on fancier software.

Do It Yourself: Paper or Speadsheet – Simple, easy, clean. I’ve tried a bunch of other stuff, but for now, I stick with my self-made Excel spreadsheet. If you’ve got no idea how to make a budget on your own, there’s a great tutorial in Chapter 10 of the book Debt is Slavery.

Pearbudget – the new version of Pearbudget is online, and carries a monthly fee, but the old downloadable spreadsheet is still available on the website, and it’s free! This is one of best budgeting spreadsheets I’ve ever seen. I definitely recommend it, especially if you aren’t too confident in your Excel skills, and you want something where you just plug in the numbers.

Mint – it doesn’t get much easier than Mint. Put in the usernames and passwords for your online banking, and Mint downloads it all and spits out some awesome graphs on how you spend your money. And it lets you set budgets for the categories. If you feel like tracking your spending yourself is way too much of a chore (and therefore you’ll never do it), Mint is for you.

Save

It’s easy to get caught up in what you’re spending, and forget about putting something aside. But there’s always something worth saving for! No matter what system you use, make Savings a category in it.

The key to saving is to always have a definite goal in mind. Your next car, a down payment for a house or condo, or even smallish things – you have to decide for yourself.

The other thing that tends to trip people up is irregular expenses – the things that come up once or twice a year. Car maintenance, Christmas spending, medical expenses… the nice thing about your 6-8 months of tracking is that about half of these will have come up in your “data” already. Try to think of all the things like this, and just put aside some money each month for it. You’ll be glad you did.

Seem too simple to really work? Well, you’re free to keep on reading – here are some good articles to continue your journey:
The Simple Dollar – Budgeting 101
LifeHacker –Adult Budgeting 101: How to Create Your First Budget In the Real World
Get Rich Slowly – Making Your First Budget