So, you have landed your first “real job.” Congratulations!
While you may be tempted to spend your new found money on yourself, it is important to take a step back and look at the big picture. Now that you have a job you also need a budget.
Here are five details to consider when creating your first budget:
1. What is your income after taxes? This is the amount of money that you will have available every month. Also known as your take home pay, this figure will greatly determine how you allocate your funds in the future. When calculating your take home pay it’s also important to keep in mind the way in which you earned your money because this will determine how it is taxed. If, for example, you get paid partially in commission these sums are taxed higher than just ordinary salary. Like commission payments, overtime, sick pay, and bonuses are all considered to be “supplemental income” by Uncle Sam and are taxed more heavily.
2. Tally your expenses. At this point in your life, you may not have many expenses. Of course, this varies from one person to the next. It does not matter how many expenses you have. What matters is that you are fully aware of your bills, including an approximate idea of how much you will be spending every month.
3. Be ready to track every dollar that you spend. If you don’t know where every dollar is going you are making a big mistake. Even if you are not the type of person who generally stays organized, you must come up with a way of doing so at this point in your life. The longer you go without tracking your spending the better chance there is that you will face a problem in the future.
4. Now is the time to start saving. Regardless of how much you are earning, it is imperative to find a way to save some money – even if just a little bit – on a regular basis. If possible, save for retirement while also building a liquid savings account.
5. Have a little bit of fun with your money. This is the day you have been looking forward to for quite some time. You finally have your own money, meaning that you can make your own decisions. While it is important to create a budget and save for the future, you should feel comfortable treating yourself from time to time. You work hard to earn your money, so you deserve it.
Put in on Paper
If you fear that you are already off track or that you may not stick with your budget in the future, put it on paper. This is one of the best ways to ensure that you are moving down the right path now that you are in the working world!