The transition from college student to young professional can be one of the most fun times in your life, but it can also be a time of stress. The increasing inflow can be extremely exciting, but only if it exceeds the increasing outflow. The bills that mom and dad used to cover (without your knowing) are now directed to your mailbox.
You can either:
- Pay them as they come
- Ignore them and pretend they aren’t real
- Have a plan ahead of time.
Of the three, which do you think is the best? If you chose the last, please continue reading. If you chose 1 or 2, God help you.
Consider this your “heads up.” After reading this article, you no longer have an excuse to not succeed financially.
The sooner you begin saving, the better off you will be. Young professionals usually have the mindset of “I’ll save later,” but it never happens. Regardless of how much you make, you should be able to cut spending (& save).
Everybody’s financial situation is different. Expenses of one 24 year old can look nothing like the expenses of another 24 year old. Brian may have a starting salary of $40,000 and have $100,000 in student loan debt, while Bill may make $80,000 and be debt-free. Because of this discrepancy, I will have to make some major assumptions. If what I say doesn’t match up with your life, then adjust accordingly. This should be used as an outline rather than a replica. (If you ever want specific advice, I encourage you to email me with specific questions. I love receiving questions from readers.)
Age: 24 (0-2 years removed from college)
Just because you “make” $60,000/yr doesn’t mean you have $60,000/yr to spend. This is probably the biggest budgeting mistake I see. People that make $60,000 think they can budget around $5,000/month. It makes the $300 car payment seem doable.
The Ideal Budget for a Single Guy
Budget around your bi-weekly paychecks rather than bi-monthly paychecks. By doing this, you will automatically save 2 of your paychecks each year.
$60,000/24 = $2500 x 2 =$5000
$60,000/26 = $2307 x 2 = $4614
This simple budgeting tip, just saved you $4632 in one year. Obviously this is easiest if you receive bi-weekly paychecks. If you do not, then set up an automatic transfer from checking to savings with the difference.
Monthly Income: $4614 (Remember we are budgeting around 26 pay periods)
- Health and Dental Insurance: $120
- 401(k) Contribution: $200 (Assuming your company matches up to 4%)
- Taxes: $1170
After-Tax & Deductions Income: $3124
- Rent: $1100 (includes cable/internet/utilities)
- Food & Drinks: $700
- Gas: $100
- Car Insurance: $90
- Cell Phone: $100
- Student Loan: $150
The above should be fairly consistent among all guys. If you aren’t making $60,000 then I’m assuming your rent isn’t $1100. Maybe you have a horrible driving record and your car insurance is double what I have listed. If that’s the case, try to find savings elsewhere.
Here’s where things start to look differently between each guy. And here’s where you can really have a positive impact on your future. Honestly, here’s where most people mess up. They see the $884 leftover each month and think that this means they can now afford a car payment of $300.
Honestly, you can probably “afford” anything if you break-down the payment into monthly installments. Instead of asking if you can afford $300, ask if you can afford $20,000. If you don’t have $20,000 sitting in your savings account, then the answer is no.
Something To Keep In Mind
In just a few short years (maybe sooner than you think), you will have to make some major purchases.
- An engagement ring
- A wedding
- Travel expenses for friend’s weddings
- A down payment for your first home