Congratulations! You Graduated...Now What?

Graduating college is exciting, but terrifying at the same time. If you’re lucky, you found a noble entry-level job and an apartment with friends, but those student loans aren’t going to disappear, and I bet you’d like to eat more than Ramen for dinner. I’m here to tell you that it’s not as difficult as it sounds. With a little old-school budgeting, you’ll be on the right path in no time.

Budgeting 101

To do and have the things you want in life, you need cold hard cash. Unfortunately, most people get their first “real” job and spend indiscriminately: routine drinks with friends, new car payment, work clothes and, of course, you have to decorate the new house. While merely examples, they are typical expenses for someone with new money. Getting your finances under control at the beginning of your career is a lot easier than trying to undo the damage later down the road.

The wealthy know precisely where every dollar goes. Take this thought with you through life. That means write it down! Whether you use a digital tracker (mint has a great app) or use paper and pen, this is an absolute must for your financial success.

Start with your bring-home pay for the month and then subtract out all of the expenses you must pay (rent, student loan payments, cell phones, and the like). What’s left is your disposable income; this is what you have to spend and save. That’s it!

Planning

If you have a negative disposable income, stop and figure out how to make more money or cut expenses because you are spending more than you’re making. If this is the case, I recommend a financial website or counselor to get back on track. Think of resources like Dave Ramsey, Nerd Wallet, or Dani Johnson’s War on Debt, or check out your local used book store for dozens of other options.

If you have a positive cash flow, it’s time to start increasing it. Now that you have a baseline of your actual spending, it’s time to put limits on yourself. Do you need to spend $250 a month eating out when you have a kitchen at home, or can you cut it in half? Can you reduce your fuel costs by trading in your pickup truck for a sedan or by carpooling to work? Can you transfer your credit card balance to a card with a lower interest rate? Can you live without your Stitch Fix subscription? Look for creative ways to create money in your pocket by cutting unnecessary costs from daily living.

The Future

Once you have your budget on track, you should start saving money from every paycheck; the rule of thumb is to save 10%. If 10% is too big in the beginning, go smaller: start by saving 1%, then 3%, then 5% until you get to 10%. Once you have three months of salary set aside, move on to retirement and big dreams (travel, house, kids). Bankrate has some great tips that breaks savings into age categories. Do some online research and learn more about how to effectively save.

You CAN do this. While money might seem scary, once you understand how it works you’ll be ruling your world in no time.