Sticking To A Budget After Graduation
Posted by December 09, 2014in Life Transitionson
One of the most difficult parts of being a graduate is creating and sticking to a budget. Along with all the other challenges of being a recent graduate such as finding a place to live and getting a job, learning how to manage your money is critical. For some, this responsibility may not be all that new. However, for other recent graduates, the idea of managing their own money may be a foreign concept. In the past, you may have daydreamed about making buckets of money at your dream job, about your sleek apartment, about going out every night. But unless you were born into a lot of privilege, this scenario is unlikely.
In fact, your first job right out of college will most likely not be your dream job. It is more likely that your first job after graduating will be an entry-level position, or you may find yourself in a part-time job that appears to have little to do with your desired field. While this is certainly disappointing and frustrating, you can take this time to learn other life skills, such as managing your money. Once you know how to manage your money and stick to a budget, you will be in a much better position. Below, you will find tips on how to make a budget, what underemployment is like, and paying off student loans after graduation.
Budgeting Your Money After Graduation
As mentioned earlier, some college graduates already have experience managing their money. Maybe they learned to make a budget when they decided to save up for a car or when they spent a semester abroad. Other graduates may not have experience with budgeting their money. But no matter, making a budget for life on your own can be a daunting prospect. However, once you break everything down, it is a fairly simple process. You just have to keep up with your budget and update your expenses frequently. However, sticking to that budget can be difficult. Your budget is ultimately dependent on the job you have, which means you need to find a job before you can make an accurate budget. If you are having trouble finding a job, then you need to base your budget on the amount of money you have saved, or you should begin looking for a part-time job that will offer you some sort of income.
Step One: Knowing how to budget your money after graduation is a balancing act. On one side of the scale you have your income, and on the other side your expenses. In order to determine how much you can pay into your expenses, you need to know your income. Again, if you have found a job, you should know your income. If you are having trouble finding a full-time job, then you need to base your budget on your savings or however much you make from a part-time job.
Step Two: After you know what your income is, it is time to determine the other side of the scale: your expenses. There are two types of expenses: fixed and variable. For a recent graduate, your fixed expenses are most likely going to include rent, utilities, and student loans. Fixed expenses may also include car payments and car insurance payments. Your variable expenses are the expenses that tend to change every month and the expenses you do not necessarily need. These types of expenses include gas for your car, eating out, and other bills you may have. In order to make your budget, you need to determine how much these expenses cost in total. For the fixed expenses, this is easy. However, because the variable expenses are just that, you need to estimate how much you think you will spend on them every month.
Step Three: After you have calculated all of your expenses for the month, you need to compare the two numbers you have: income and expenses. Hopefully, your expenses are equal to or less than your income. If you find that you have more expenses than income, you will have to play with your variable expenses and see if you can get your total monthly expenses down. If you have money left over at the end of the month, deposit it in your savings account.
Step Four: Now that you have your budget set, you must stick to it. Living frugally can be challenging at first, but you will quickly adjust and find ways to still fit in fun with your friends. If you find it hard to stick to your budget, make sure you have allocated your money correctly. It can also be helpful to check in with a friend in a similar situation every now and then in order to motivate each other.
What Is Underemployment?
Underemployment is not unemployment. Unemployment is being without a job, while underemployment usually refers to part-time work or internships. The current job market is not particularly inviting to recent graduates, since many job openings are looking for people with several years’ experience in a given field. This can make your job search difficult, discouraging, and frustrating, and you may not be able to find a full-time position in your desired industry. One way to deal with this is to find a part-time job or an internship. You will be underemployed, but not unemployed, and while this may still feel beneath you, it is a better alternative. Here are some benefits of being underemployed:
Experience: One option you have as a recent graduate is to take a part-time entry-level position or even participate in an internship. You might think that these kinds of positions are beneath someone with a degree, but remember that you can gain valuable experiences and skills from these positions that you may be able to apply to future jobs. You will also have one more work experience to add to your resume, and you may also gain contacts and grow your professional network.
Income: Yes, underemployment usually involves being underpaid, but being paid minimum wage or a low salary is better than not being paid at all. Whatever you make from your job will go towards paying off your student loans and paying your bills. This is better than dipping into your savings account to cover these costs.
Possibility of Advancement: Because many underemployed positions are internships and entry-level work, there is usually a chance for promotion or advancement within the company. This is dependent on your work performance and if any jobs open in the company. However, do not expect that you will be offered a job. Just do your work well and get as much as you can from the experience.
Paying Off Student Loans
While you are in school, it is generally fairly easy to forget about your student loans that are financing your education. However, once you graduate, you will become very aware of the debt these loans have given you. Paying off these loans is one of the biggest responsibilities you are going to face as an adult, and you need to work loan payments into your monthly budget. It will likely take you more than a few years to completely pay off your loans, and making those initial payments may be challenging, especially if you are under- or unemployed. Here are some tips on how to best pay off your student loans.
How to Pay Off Student Loans
- Combine your loans so that you only have one payment. Often, all of your loans will be handled through one company or organization. If that is the case, then you will most likely be able to consolidate the loans into one payment. When you do this, the loan payments are a bit lower, and it could save you money in the long run because you may not end up paying as much interest. Before you decide to do this, be sure you consult your loan provider.
- Pay off the highest loan first and then keep paying that much towards your other loans. If you cannot consolidate your loans, then you should focus your money on a particular loan and get it paid off first. After you have paid off that loan, you should continue paying the same amount of money, but on a smaller loan. Your loans will be paid off quicker this way, which means you will not be paying as much in interest.
- Watch your spending. You will have other bills and expenses, so don’t feel like you have to do completely without certain things to pay your loans off within the year. Be realistic. Consolidate or apply for deferment or lowered payments if you cannot afford to pay the suggested amount each month. Even after that, keep an eye on your spending and avoid large or frivolous purchases. You should also try to put some money into your savings account each month so that if an emergency does arise, you will have some support.
Budgeting your money does not have to be a painful process. It can be difficult to live frugally at first, but paying off your loans and setting some money aside in your savings are both worthwhile ways to allocate the money you make. While the job market is not ideal, you can still find a part-time position to support you in the meantime. So, good luck with the job hunt, and happy budgeting!