You’ve graduated and landed a great job making some decent money – congratulations! With your new paycheck, you may have had some fun up to this point. The only problem is that you’re starting to look at your bank account wondering if you should be doing something different with all of this money you’re getting every two weeks. Good thinking! There is something more you should be doing with your paycheck, and it’s great that you’re thinking about it now versus later.

The following are some step-by-step tips to create an awesome financial situation to start off your adult life. You’ll be saving for now, saving for later and you’ll still have money to have a good time.

Step #1: Assess the Income

How much are you making per month right now? This is going to be easy if you only have money coming in from one source – your salary. If you have money coming from other places, such as a part-time job, you’ll need to start factoring that in as well.

The only way this can become a bit hard to do is if you have different amounts coming in at each time. For example, if you’re a part-time waitress, it may be hard to calculate how much you’ll make in tips. For budgeting purposes, take the average of how much you earn and then use that. You could be safe and just use the lowest amount you’ve made, if that makes you feel better. It’s up to you.

Step #2: Assess the Bills

Bills are the most important expenses to take care of because you don’t ever want creditors coming after you for not paying them. That’s why after you figure out how much you earn, you need to figure out how much you owe.

Make a list of all of your bills right now. Do not include anything that you need to spend money on like gas, food, etc. You will deal with that later.

Once you have written down all of your bills, tally it all up. You will need to do some math at this point – subtract your bills from your income. You will now have the difference, and that’s what you will use for the next part of your budget.

Step #3: Average Your Expenses

If you have online banking, bring it up and write down how much you’ve spent the last couple of months on food, gas, clothes, transportation, etc. All of the necessities you need to spend money on should be included in this part of the budgeting process.

Remember – this is just for necessities – not your wants. You will deal with your wants later.

Take the average of each expense and add them all up. You should then take that total and subtract it from the difference you have after your bills.

You should have a new difference now. That’s what you’re working with going forward.

Step #4: Save for Retirement

You’re never too young to save for retirement. You can sit down with a financial advisor to help you come up with a plan of action, or you can start saving for retirement in through a 401(k) your employer offers or with a traditional/Roth IRA. There are advantages and disadvantages to each of these, so research each one before you decide to invest in one or more of these retirement savings plans. Some employees will match your 401(k) contributions, and some people prefer Roth IRAs over traditional IRAs because they don’t have to pay taxes upon withdrawal. The more you learn about each one now, the better you will be later on in life.

Step #5: Build Your Emergency Fund

You need an emergency fund. Many experts believe that you should have at least three months of salary saved in case you lose your job. Some say six. It may take a while for you to get to this amount, but it is your goal and you should try to get to it as soon as possible.

The best way to determine how much you should save is by looking at the amount you have left over after your bills and expenses. Take half of that for savings – retirement and emergency fund. You can then divide that up between the two. This way you are saving enough each month to get you to a place where an emergency won’t end up crippling you financially.

Step #6: Spend Wisely With What’s Left Over

After the bills, expenses and savings, you should have some money left over for fun. What if you don’t? This is a sign you’ve had a little too much fun over the past few months. All you have to do is play catchup, and that means limiting your fun times to inexpensive activities. Watching a movie at home with a meal you’ve prepared is much less expensive than going out to a restaurant and then to the movies at your local cinema. Going to the park for some fun playing Frisbee, flying a kite or hiking is much less expensive than going shopping, seeing a concert or doing something else that could cost you an easy $100 or more.

Tips to Get You Through

Sticking to a budget is easy in theory, but it can be hard in practice. There may be items you want that you really don’t have the money for at times. Self-control can help you in those times. You can always save up for items that you do not have money for after you’ve saved for retirement and the emergency fund. Yes, that might mean more inexpensive fun activities for a few months, but it will all be worth it when you can buy something without putting your credit in jeopardy.

Credit can be good and bad. The only way to have a good credit rating is to use credit, but you need to use it responsibly. When you buy something with credit, be sure that you can pay it off when the bill comes. If you can’t, then don’t buy it. If you allow money to roll over each month, you pay interest, and that’s adding money to whatever you bought. Think about that when you say you’re buying something because it’s a good deal. How good of a deal is it when you end up paying interest on it?

Don’t think you have to stick with the budget you create. If it’s not working for you, go head and make adjustments to it. As long as you keep the priorities there such as the bills, expenses and savings, you will be happier with your income. You can usually play around with some of the expenses to help you change your financial situation now. For example, you can spend less money on groceries and then have more money to save and have fun with. You can also come up with some ways to reduce your spending on transportation, so you can use that money elsewhere. Think of budgeting like a game – you have a certain amount of money and you have to use it in ways that will help you and make you happy.

Get Started on Being Financially Responsible

You may not feel like this is important right now, but you will love yourself in a few years when you have so much more money in your accounts than your friends. You will love having financial freedom and not worrying about a surprise bill in the mail. Take care of yourself now, so you can be good later. That’s what it means to be an adult. Start out strong, so you can be successful later.


Are you a financial guru? A novice with tips for new grads? Questions? Share them in the comments!

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Sarah Landrum is the founder of Punched Clocks.

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