Personal budget

Archived From: Finance
  • Go to page :
  • 1 2
  • Text Only
Voting History
rated:
Hey guys. I'm a currently a senior in college and after this spring, I will be working full-time. As someone who has had everything paid for and has never really needed to be very aware of personal spending/budgeting, I was wondering how I could start in doing that. Are there any starting numbers/averages for monthly expenses? How much should I be putting into retirement/savings?, etc etc.

Thanks in advance!

Member Summary
Most Recent Posts
BackinBlack is a personal budgeting app for your iPhone.

If your interested in having input on the next generation Backi... (more)

BackinBlackBudget (Feb. 26, 2013 @ 3:51p) |

↑ Spam

stanolshefski (Feb. 26, 2013 @ 4:37p) |

The app I'm using for my iPhone is Toshl Finance. It's simple, lets you export your expenses to excel, and easy to use. ... (more)

rayzha (Feb. 26, 2013 @ 7:55p) |


I started with a rule of thumb of 50/30/20. Limit your "needs" (e.g. housing, groceries, gas, etc.) to 50% of your monthly net take home pay, 30% to your "savings", and 20% to your "wants". It's tough to do starting out with your first full-time job, but it is something to work towards. This way, your monthly income could be reduced by half and you'd still have enough to cover your monthly bills.

I'd also recommend to start building up at least a 6 month emergency fund. Take your monthly "needs" and figure out what 6 months of that would be. If your employer offers a 401k with a match, contribute at least enough to get the most employer match, as it's basically free money. Look into contributing to an IRA as well. I prefer a Roth IRA for a little bit of tax diversification.

Do a search and there's plenty of options for you.

Personally, if you have student loans, Id go for the following priority:

~12 mo in living expenses as emergency fund, can be partially fulfilled by a ROTH IRA, with the rest in cash/savings
401k up to employer match
Max ROTH IRA
Student Loan debt
Max 401k beyond employer match

Rent/Utilities/Food (my rule of thumb is to keep this to <1/3rd of your takehome pay)
Restaurants/Fun/Going Out/etc (10-20ish%/mo)
This leaves about half your takehome pay to savings/debt pay down.

rayzha said:   Are there any starting numbers/averages for monthly expenses?Yes.

I recommend you start tracking your expenses in Mint.com now. Once you have some data built up, it will be easier to budget going forward, see where you're spending your money and whether it matches your goals, and start controlling your expenses. It helped me a whole lot.

enc0re said:   I recommend you start tracking your expenses in Mint.com now. Once you have some data built up, it will be easier to budget going forward, see where you're spending your money and whether it matches your goals, and start controlling your expenses. It helped me a whole lot.
agree with this. I wish I had created an account at mint.com long before I started using it.

rayzha said:   Hey guys. I'm a currently a senior in college and after this spring, I will be working full-time. As someone who has had everything paid for and has never really needed to be very aware of personal spending/budgeting, I was wondering how I could start in doing that. Are there any starting numbers/averages for monthly expenses? How much should I be putting into retirement/savings?, etc etc.

Thanks in advance!


This is all very subjective.

- What do you currently spend? If you aren't planning to move, what is your current rent+rental insurance+bills and utilities?
- What will you be doing? Do you have an offer already, and if so how much will you be earning?
- Do you have any debts?
- What are your assets?

Without knowing the answers to these, we can only give very basic budgets like the 50-30-20.

rayzha said:   Hey guys. I'm a currently a senior in college and after this spring, I will be working full-time. As someone who has had everything paid for and has never really needed to be very aware of personal spending/budgeting, I was wondering how I could start in doing that. Are there any starting numbers/averages for monthly expenses? How much should I be putting into retirement/savings?, etc etc.

Thanks in advance!
There's a commonly used expression in personal savings/investing - Pay yourself first. The idea is that if you automatically direct a portion of your income to savings, you will find a way to live on the rest. It doesn't really matter where you put it - savings, 401k, IRA, investments. If you save first, you'll never miss it, but if you try to save what is left over at the end of the month, something will always come up to keep you from meeting your savings goal.

Develop this lifelong habit now and stick with it. You'll be way ahead of the crowd. I'd suggest at least 10% but if you can manage closer to 20%, you'll obviously be better off.

Everything mentioned above is good advice, but as someone who fairly recently (5 Yrs) graduated college and was in a similar position; I'd also focus on what you DON'T need. The temptation for many is once you get a job that you should get a new car or buy a house. You'll see your friends turning into $40k a year millionaires with their new cars and their houses, and their going out every night lifestyle. Don't fall into this trap. Use credit cards responsibly, pay for cars with cash (save up and get something practical...it doesn't have to be a beater). You should really sit down and understand your true needs vs. wants and realize that the lifestyle your parents have been paying for is probably not one that you will be able to afford on your own.

Budgets will vary a fair amount depending on where you live. e.g. housing might cost you $500 in Ohio or $2000 in Los Angeles.

Good starting rule of thumb is to shoot for 10% or more towards retirement accounts.

Thanks for all the replies. I will definitely start to track on Mint.

I guess some more details:
I'm going to be working in Ohio, making just under 5k before taxes a month. I don't have any debt (credit card, school, etc). I have a car (about 5 years old) that is paid off.

You are in a great position to save considering you have no debt and a fully paid for car. If possible, I would invest a lot more than 10% into retirement. Time is on your side and the higher you contribute now into retirement savings will mean larger amounts in 40+ years. If I had to do it over again in my early 20s, I would have done at least 15 to 20% into retirement savings. Once you get used to contributing that amount, you will learn to live off less.

I agree. You are in an enviable position and you will soon realize how much of a blessing that is. The only other advice is save, save, save. You have to do what works for you, what I recommend but set up a good 6 month emergency fund, max out a Roth IRA, contribute to company 401(k) (up to the point that they stop matching), and my personal touch is to save for things you WANT. Sure, your car is great now, but start siphoning off $50 or $100 a month for a car fund. From this you can cover unexpected maintenance and save for a new car. Start a travel fund, house fund, etc. All of these things will come in handy down the road when you are ready to buy another car, buy a house, or go on a kick ass trip to Europe plus it allows you to set goals and attain them while still saving.

live like a student for the first 3 years after you get your first job. Common sense will follow on how to budget.

I would spend just 30-60 days using this, which seems to be updated every year by a FWF member.

I did it for 30 days, and the number of receipts I had to keep was telling in itself.

It was a really eye-opening what all the 'swipe-for-coffee', 'swipe-for-gas', 'swipe-for-lunch-out' behaviors were costing me, not to mention 'invisible' expenses like auto-debits for toll-tags and other non-interactive items.

Be diligent with the tracking for a month, and see what you glean. Good luck!

50% only? Ha, not in CA, it is more like 200% for needs.

suderduperloo00p said:   50% only? Ha, not in CA, it is more like 200% for needs.

Does needs equal taxes

Bowen said:   Everything mentioned above is good advice, but as someone who fairly recently (5 Yrs) graduated college and was in a similar position; I'd also focus on what you DON'T need. The temptation for many is once you get a job that you should get a new car or buy a house. You'll see your friends turning into $40k a year millionaires with their new cars and their houses, and their going out every night lifestyle. Don't fall into this trap. Use credit cards responsibly, pay for cars with cash (save up and get something practical...it doesn't have to be a beater). You should really sit down and understand your true needs vs. wants and realize that the lifestyle your parents have been paying for is probably not one that you will be able to afford on your own.

I've never heard that.. 40K a year millionaires.. Thanks for the laugh. Reminds of the idiots at my old job who drove leased BMW's until they probably got repo'd 3 months later.

Thanks for all the advice guys. I definitely realize that I've been put in a very fortunate position, which is the main reason why I want to start saving smart as soon as possible. I have definitely seen many of my friends get very carried away in their first couple of years of employment and I don't want that to happen to me, especially the whole "I'm gonna buy a brand new Benz with all the money I have just to show off even though I probably can't realistically afford it" mentality.
I also want to do this because I want to see how much I can set aside to perhaps purchase a car for my parents or start investing in real estate (something my parents do currently).

I'm pretty much a complete idiot with the whole savings plans/roths/401(k)s. Looking at my offer letter, it says that I'll be enrolled in their savings plan at a 6% pre-tax contribution level, where they will match 50 cents on the dollar up to a company match of 3%.
Does this mean that if I put in, say $500, they will put in $250, up to 3% of my pretax salary?

If you contribute $100/mo, they'll match $50 (50 cents on the dollar). If you contribute $300/mo (6% of your 5K/mo), they will match $150 (= 50 cents on the dollar = 3%). You can contribute more than $300/mo, but they will not put more than $150/mo (3% of your salary).

So, following the most standard advice already expressed above, you should enroll in the savings plan at 6% rate to get the maximum company match, as you already described.

Your next priority should be to fund a Roth IRA. The maximum contribution for 2013 is $5500, and you can contribute any time before the tax filing deadline (mid-April of 2014). The Roth IRA can double up as part of your emergency fund. A Roth can be opened at most major banks or investment institutions, and you yourself can select what the funds are used for -- keep it as cash, get a Certificate of Deposit, or even invest in stocks, ETFs, or mutual funds, depending on your risk tolerance.

Once you've fully funded the Roth for the year, start putting money away in a savings account so that your combined total "emergency fund" is 3-12 months of your regular living expenses, whatever you are comfortable with.

Once you've funded your emergency fund, you can either increase your 401(k) contributions (the increase will not be matched, but it's still pre-tax), or start saving money in savings or non-retirement investing accounts for whatever your other goals are, like real estate. This decision is not straight forward, and nobody knows in advance what their income tax rate will be in retirement, but if you stand to inherit your parents' real estate empire and retire very wealthy, for example, I wouldn't bother with increasing the 401(k) contributions beyond the 6%. At this time you can also consider paying off your loans quicker if the interest rates are relatively high and you can't get a better return for your money elsewhere.

Keep in mind many 401k matches have a vesting period. You have to work for the same company for a few years before you are fully vested in the match.

Bowen said:   Everything mentioned above is good advice, but as someone who fairly recently (5 Yrs) graduated college and was in a similar position; I'd also focus on what you DON'T need. The temptation for many is once you get a job that you should get a new car or buy a house. You'll see your friends turning into $40k a year millionaires with their new cars and their houses, and their going out every night lifestyle. Don't fall into this trap. Use credit cards responsibly, pay for cars with cash (save up and get something practical...it doesn't have to be a beater). You should really sit down and understand your true needs vs. wants and realize that the lifestyle your parents have been paying for is probably not one that you will be able to afford on your own.

I'm not sure I understand the obsession with paying for cars with cash. Waiting until you have the cash for it doesn't guarantee that he doesn't get something excessive.

Buy as little car as you need regardless of how you finance it.

Do yourself a favor and search through the FWF archives for some of the similar threads, as these tend to pop up from time to time. You'll quickly see the standard advice being repeated, so pay attention to it, but also, make a note of what some of the older members regretted not doing while they were younger. I think you can learn a lot from that as well.

Set up a 2nd account which has money automatically diverted from your paycheck every month.
Max the 401K up to the matching limit.
Max the Roth IRA.
Start networking now, focus on networking.
Avoid the "penny wise, pound foolish" pitfall. Realize the snowball power of earning more early. If your first raise is 2% higher because you focused more on the quality of you work, all of your subsequent raises, bonuses, new job offers and yearly salary will be that much more.
Travel while it is cheap (relatively) and easy for you.
Have some fun

b0mbrman said:   Bowen said:   Everything mentioned above is good advice, but as someone who fairly recently (5 Yrs) graduated college and was in a similar position; I'd also focus on what you DON'T need. The temptation for many is once you get a job that you should get a new car or buy a house. You'll see your friends turning into $40k a year millionaires with their new cars and their houses, and their going out every night lifestyle. Don't fall into this trap. Use credit cards responsibly, pay for cars with cash (save up and get something practical...it doesn't have to be a beater). You should really sit down and understand your true needs vs. wants and realize that the lifestyle your parents have been paying for is probably not one that you will be able to afford on your own.

I'm not sure I understand the obsession with paying for cars with cash. Waiting until you have the cash for it doesn't guarantee that he doesn't get something excessive.

Buy as little car as you need regardless of how you finance it.


I skipped over a lot of my thought process, but yes that's true. OP is admitting he is a financial Noob, Financial Noobs generally view things in terms of monthly payments in which $50 more per month can buy so much more car. But yes, you make a good point and probably say it better than I did.

Should I just search for like "budget" or "college"?

Also, about Bowen's post. Is there a hidden trap when you think of monthly payments like that? If I can get a decent upgrade for only $50 a month, should I not take it?

The trap is not hidden. To people bad at math, $50/mo does not sound as much as $600/yr, or $1200 on a 2-yr phone contract, or $1800 on a 3-yr car lease, or $3000 on a 5-yr loan.

Don't think of whether the upgrade is worth $50/mo, think of whether it is worth the total cost.

Or just think about whether you need it. If you don't, why are you wasting money on it? Keep to this train of thought and you'll be able to avoid your expenses creeping upward on you. Just because something is worth it doesnt mean you should buy it. Thats the trap people over in Hot Deals fall into all the time. Budgeting is about figuring out what you need and getting rid of everything else.

rayzha said:   Hey guys. I'm a currently a senior in college and after this spring, I will be working full-time. As someone who has had everything paid for and has never really needed to be very aware of personal spending/budgeting, I was wondering how I could start in doing that. Are there any starting numbers/averages for monthly expenses? How much should I be putting into retirement/savings?, etc etc.

Thanks in advance!


You must pay yourself first. Put away 10% if you want to retire some day. Put away 20% if you want to retire in pretty good shape. Put away 30% if you want to become wealthy.

Those are minimums and they must be considered unbreakable obligations. Combine that with an unwillingness to carry debt* and everything else will fall into place. You can't spend what you don't have and if you are putting enough money away it doesn't very much matter how you are spending the rest of your money.

*"debt": I am referring to debt incurred due to a lack of cash as opposed to debt when it is simply a smart financial move.

scripta said:   The trap is not hidden. To people bad at math, $50/mo does not sound as much as $600/yr, or $1200 on a 2-yr phone contract, or $1800 on a 3-yr car lease, or $3000 on a 5-yr loan.

Don't think of whether the upgrade is worth $50/mo, think of whether it is worth the total cost.


When talking about cars, don't forget that a higher sales price also means higher sales tax, and higher property taxes (if your state/county has that). It can also mean higher car insurance premiums.

stanolshefski said:   scripta said:   The trap is not hidden. To people bad at math, $50/mo does not sound as much as $600/yr, or $1200 on a 2-yr phone contract, or $1800 on a 3-yr car lease, or $3000 on a 5-yr loan.

Don't think of whether the upgrade is worth $50/mo, think of whether it is worth the total cost.


When talking about cars, don't forget that a higher sales price also means higher sales tax, and higher property taxes (if your state/county has that). It can also mean higher car insurance premiums.


...and if you buy new... more depreciation when you drive off the lot.

rayzha said:   Should I just search for like "budget" or "college"?

Also, about Bowen's post. Is there a hidden trap when you think of monthly payments like that? If I can get a decent upgrade for only $50 a month, should I not take it?

Dont forget, you can get a fantastic upgrade for NO increase in monthly payments or actually a smaller monthly payment.

E.g., 20k car, 2% APR, $350/mo payment
20k car plus 5k in upgrades = 25k, 3% APR, $330/mo payment

Can you figure out what is "wrong" (the math is fine).

Wasnt there a thread recently with someone leasing a car and the dealer calling back to resign papers with a worse deal?

BrodyInsurance said:   
You must pay yourself first. Put away 10% if you want to retire some day. Put away 20% if you want to retire in pretty good shape. Put away 30% if you want to become wealthy.

Those are minimums and they must be considered unbreakable obligations. Combine that with an unwillingness to carry debt* and everything else will fall into place. You can't spend what you don't have and if you are putting enough money away it doesn't very much matter how you are spending the rest of your money.

*"debt": I am referring to debt incurred due to a lack of cash as opposed to debt when it is simply a smart financial move.


So 30% total for both savings and retirement accounts?

uutxs said:   
Dont forget, you can get a fantastic upgrade for NO increase in monthly payments or actually a smaller monthly payment.

E.g., 20k car, 2% APR, $350/mo payment
20k car plus 5k in upgrades = 25k, 3% APR, $330/mo payment

Can you figure out what is "wrong" (the math is fine).

Wasnt there a thread recently with someone leasing a car and the dealer calling back to resign papers with a worse deal?


I don't get it..

uutxs said:   rayzha said:   Should I just search for like "budget" or "college"?

Also, about Bowen's post. Is there a hidden trap when you think of monthly payments like that? If I can get a decent upgrade for only $50 a month, should I not take it?

Dont forget, you can get a fantastic upgrade for NO increase in monthly payments or actually a smaller monthly payment.

E.g., 20k car, 2% APR, $350/mo payment
20k car plus 5k in upgrades = 25k, 3% APR, $330/mo payment

Can you figure out what is "wrong" (the math is fine).

Wasnt there a thread recently with someone leasing a car and the dealer calling back to resign papers with a worse deal?


length of loan? 72 months vs 60 months? -->less monthly payment but significantly higher total amount paid

So 30% total for both savings and retirement accounts?

30% towards becoming financially independent. This doesn't necessarily mean a retirement account. It wouldn't be a savings account. A savings account is typically something that I would just call deferred spending. It is there so that money is available for things that are outside of the monthly budget.

You'll need $50 a week for food/groceries.
And ~$50 a week for gas.
And another $100 a week for rent/insurance payments.

After that $200; everything else is technically disposable.

tetromibi said:   length of loan? 72 months vs 60 months? -->less monthly payment but significantly higher total amount paid
yes.

gpandy said:   I started with a rule of thumb of 50/30/20. Limit your "needs" (e.g. housing, groceries, gas, etc.) to 50% of your monthly net take home pay, 30% to your "savings", and 20% to your "wants". It's tough to do starting out with your first full-time job, but it is something to work towards. This way, your monthly income could be reduced by half and you'd still have enough to cover your monthly bills.

I'd also recommend to start building up at least a 6 month emergency fund. Take your monthly "needs" and figure out what 6 months of that would be. If your employer offers a 401k with a match, contribute at least enough to get the most employer match, as it's basically free money. Look into contributing to an IRA as well. I prefer a Roth IRA for a little bit of tax diversification.


thanks. great post! I have been moving towards simplification of my finances, investing etc and this is a good one to distribute by paycheck in 3 bank accounts

camiolo said:   You'll need $50 a week for food/groceries.
And ~$50 a week for gas.
And another $100 a week for rent/insurance payments.

After that $200; everything else is technically disposable.


$200 a month for all groceries? $400 a month rent? I wish I had those expenses.

BackinBlack is a personal budgeting app for your iPhone.

If your interested in having input on the next generation BackinBlack app, fill in a short online survey here! Text

Skipping 2 Messages...
The app I'm using for my iPhone is Toshl Finance. It's simple, lets you export your expenses to excel, and easy to use.

Thanks for all the advice everyone. Hopefully I can give you all updates later on on how I'm doing!



Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

TRUSTe online privacy certification

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2014