Budgeting After College: Essential Tips for New Graduates

Graduates in caps and gowns holding diplomas during graduation ceremony.

BIG Ideas:

  • A monthly budget can help you meet your bills, save for planned and unplanned expenses, and avoid costly debt.
  • A popular budgeting guideline is the 50/30/20 rule, which can help you determine how to allocate after-tax money.
  • Build savings for emergencies, goals, and retirement into your monthly budget.

Mission accomplished.

All the paper-writing, test-cramming, and finals-stressing is complete. You’ve graduated from college and are about to take the real world by storm. Your journey of learning, however, isn’t over. Now it’s time to develop an important financial skill to help you throughout your life: budgeting after college.

Why is budgeting after college so important? Well, a budget is a lot like your phone charger. You don’t realize how much you need it until you run low or lose power. But like that charger, a budget for college graduates can give you power, helping you:

  • Ensure you have the money to meet your monthly bills
  • Prepare for emergency expenses and other life goals
  • Avoid expensive debt
  • Develop good financial skills
  • Reduce stress
  • Sleep better

A budget for new college graduates is especially important because you’ll likely have the highest earnings in your life. You’ll also probably have more expenses, like groceries, rent (if you don’t move back home), utilities, car payments, gas, other commuting expenses, and so on.

Tips For Managing Your Money After The Real World

So now that you know why a budget is important and how it can help you, let’s look at some tips to help you build yours:

  • Apply the 50/30/20 rule. It’s a guideline for how to spend your money after taxes. Essentially, it means your money should be budgeted in the following ways:
    • 50% of your after-tax money should be budgeted for needs (like your rent, utilities, gas, groceries, student loans, etc.).
    • 30% for wants or discretionary spending (like streaming services, concert tickets, travel, dining out, etc.).
    • 20% for savings, including an emergency fund, other goals like buying a car or home, and retirement.

Keep in mind that this is a guideline. If you have higher monthly expenses, such as student loan payments or rent, adjust the percentages to fit your needs.

  • Pay down debt. You may have credit card debt lingering from college. One way to ensure financial security is to reduce that debt by paying more than the minimum monthly payment.If you have multiple credit cards, pay off high-interest debt first while maintaining minimum payments on other cards. Never miss or be late with a payment; the fees and accrued interest will only add to your debt problem.
  • Save for emergencies. Unexpected expenses happen in life. You can prepare financially with an emergency fund of 3-6 months of living expenses. Start by opening an emergency fund account and setting up regular deposits or automatic transfers.Also, if you get a tax refund or a bonus at work, put some extra money in your fund. Remember, your fund is for emergencies, such as car repairs or medical bills, not fashion emergencies.
  • Save for other goals. Now that you’re in the real world, you may have future goals, like buying a car or a home one day. Add saving for these goals to your monthly budget. Even just a few dollars a month can build over time. The point is to make saving a priority and a lifelong habit.
  • Plan for retirement. It may seem crazy to plan for retirement when you’re just starting your career. But the earlier you start saving, the more money you’ll accumulate.Enroll in your company’s retirement plan if they have one. Also, if they offer matching contributions, contribute as much as possible to take advantage of this valuable benefit. If you don’t have access to a retirement plan, open an Individual Retirement Account (IRA) with a financial institution.
  • Build your credit. Credit is essential to helping you reach your financial goals. If you haven’t yet established credit, consider getting a secured or low-limit credit card to help you build your credit score.If you already have credit, work on boosting your credit score by making monthly payments on time, keeping your balances low, and limiting the number of credit cards you have.
  • Keep at it. Budgeting isn’t a one-time thing. You’ll need to keep track of expenses, income, savings, and debt every month and throughout your life, and adjust accordingly. Check out these budgeting apps that can help you. 

Brazos is Here to Help You Manage Student Loan Debt

For more than 40 years, Brazos has helped make college costs more affordable for parents and students. As a Texas non-profit lender, we offer refinance loans that could help you lower your monthly student loan payments, reduce interest fees, and free up room in your budget. Contact us to learn more.