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Recommended reading: Ramen Noodles, Rent and Résumés
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Most college students find the transition from classroom to workplace difficult, which includes gaining financial independence from your parents. My younger brother is the inspiration for this piece, however, because he graduates in December and is already showing signs of financial ignorance. (Sorry, Ryan!)
In a recent interview with Kristen Fischer, author of “Ramen Noodles, Rent and Résumés: An After-College Guide to Life,” she outlines the steps for creating and maintaining your budget, a topic she devotes an entire chapter to in her book.
1. Make a budget. While following a budget after school sounds like more work, it’s vital to ensure that you stay on track of finances after college. With loans to pay off and probably not much income coming in, a budget gives you a good idea of where you stand. Even if you scratch down your monthly bills and expenditures on a piece of paper, you’ll still see where you need to put your money and where you can cut back spending.
2. Review your budget regularly. The budget won’t work unless you repeatedly review it. For example, if you’re not making your minimum credit card payment month after month, there’s a problem, and you’ll need to see where you can take money from to make the payment. Looking at the budget helps you remember where funds need to be allocated so you don’t wind up doing something like getting extra money one month and blowing it all on something frivolous because you think you have “extra” spending cash. Even if you’re a savvy spender, knowing what your expenses are will help you be more aware of your financial status.
3. Adjust your budget as necessary. The great thing about a budget is that it can be amended. For example, if you’re just out of school, you may not be paying off student loans for the first six months. But, when that payment is added to your expenditures, it can hurt! So, you’ll need to constantly re-evaluate where money is coming and going. Think of your budget as a living document – you have the power to revise it at any time and doing so can keep you on top of finances.
4. Integrate your budget into your long-term goals. There will come a time when you’re not just “getting by” and you’ll want to think about what you want out of things on a long-term basis. If you’re planning on getting a promotion next year, don’t spend that money as if you have it already. Instead, plan to use the extra money when you get it to pay off something like credit card debt, which usually has a higher interest rate than school loans and isn’t tax-deductible. Once you get on your feet, you can plan on starting a separate fund and putting money towards things you want.
5. Keep your chin up. Remember that everyone is going through a hard time after college. You may not get the job of your dreams or be living where you want to. School loans may be overwhelming, and the economy can be shaky. You may give in to a silly purchase or wind up losing money. You don’t always have to stick to your budget, but stick to the process of budgeting and take control of your finances. That’s your best defense against the crazy “real world,” and the best way to ensure you’ll make it out there.
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