How to Make a Budget for the First Time
Discover budgeting tips and savings programs to help you manage your finances
You've just graduated and have your first job offer. Congratulations! Now it's time to learn how to make a budget so you can manage your finances responsibly with your new salary. You've probably heard budgeting tips like "make your coffee at home," "pack your lunch," "turn off lights" and "bike to work." But if you're like most recent graduates, you're looking for more substantial advice. Learning how to make a budget will make your spending more tangible, illuminating ways to cut back.
Budgeting tips to live within your means
While the budgeting tips above may seem cliché, they're rooted in an important principle: living within your means. You may need a credit card to manage expenses between pay periods, but try to spend only what you can pay down every month. When you have a regular paycheck, it can be easier to spend faster than you realize and quickly find yourself in debt. To prevent this from happening, create a budget before you even get your first paycheck. Once you have a basic budget created, tweak it to see where you can spend less and how much you can save each year when you do. Your budget should include the following items:
- Annual salary: Account for taxes and benefit deductions. You may be able to elect for pre-tax deductions for flex spending accounts.
- Rent and utilities: Research apartments near your job. Your budget will help you determine the most you can spend and how much having a roommate could help you save.
- Groceries and household items: Set aside cash for monthly groceries, laundry, toiletries and cleaning products. Don't forget the costs to furnish your new space.
- Clothes: Include money for professional attire, formal wear, and updates to your casual wardrobe.
- Savings for gifts and vacations: Plan for vacations, wedding gifts, birthdays and Christmas in your budget.
- Restaurant meals: If you eat out with co-workers, go out to a nice restaurant with friends or just don't feel like cooking one night, that's okay! Just make sure you have a place in your budget for restaurant meals.
- Transportation: Decide whether you can afford to buy a car now. Factor in loan payments, car insurance, repairs, parking and gas. If you think it's too much for now, look into public transportation and apartments within walking distance of work.
- Gym membership: Staying active is important, and having a gym membership helps make sure you get your exercise in with access to classes and weight lifting and cardio equipment.
- Charitable donations: The great thing about these is that they are tax-deductible! Maybe this is something you decide to put off for your first year to build your savings, but after year one, consider allocating a portion of your budget to contributions.
Create a personal savings plan and make regular contributions
The point of a budget is to save money wherever you can. Once you start saving, consider the different savings programs available to you and make a personal savings plan with four simple components:
- A basic savings account: Simply having a savings account may help you budget. Set aside money for clothes, gifts and vacations and you won't spend it on other items as you might if it were in your checking account.
- An Emergency Fund: Every personal savings plan should include an emergency savings fund. This should be enough cash to help you cover your expenses for at least three months should you lose your job or need to manage a transition.
- Retirement savings: Your personal savings plan should also include some sort of retirement savings program. At the end of the year, consider opening an IRA, a money market account or certificate of deposit with your savings to set cash aside for the long term. You may even be able to get a tax deduction for opening an IRA.
- Saving for the future: Want to buy a home by the time you're thirty? Consider specialized savings accounts that will help you set aside money for your bigger goals.
Talk to Citizens Bank to create a personalized savings plan
A Citizens Bank representative can help you determine which savings account is best for you. Discuss your goals, and we'll work with you to create a personalized savings plan that will help you reach them. If you know how to make a reasonable budget and have the willpower to stick to it, you'll be able to save a lot more. Then, you can open a savings account with us and grow your funds even more.