Learning to Budget

You've learned astrophysics, biochemistry, and sociology. Now, you've graduated and need to learn Cooking 101, Networking at work, and, probably most importantly, budgeting. If you have an automated expense manager, this is an easier task. No matter how you do it though, it's an important life skill to learn, and it's never too late to start.

Budgeting beer money and budgeting the electricity bill are two completely different things. In the real world, no one will give you an extension on a payment, so it's important to learn how to make them on time and to have enough money left over for fun.

The first step is to write down all the expenses you think you will have. These can include rent, electricity, cable, gas, and other life necessities, as well as food, clothes, and movies. Yes, it is important to budget for fun as well because unexpected Chinese takeout dinners and the Netflix bill can add up quickly, especially if you are not expecting them to show up on your credit card.

Your monthly budget should encompass all of these things in a certain ratio. Finance specialists generally recommend allocating 30% to housing, 20-30% to food, 10% to transportation, and 10% to monthly savings. While you are spending, it is also important to factor in an emergency fund of an amount you feel comfortable with, usually 2-3 months' rent and expenses, as well as 401(k) retirement contributions, if your company matches your contributions.

Then, figure out your monthly paycheck, in "clean" money, with all taxes and withholdings deducted. Most people get paid bi-weekly, so it's easy to break down your expenses and paychecks in a weekly form, either in a bill manager or on pencil and paper, to see how your incoming money matches your expenses.

Then, after fleshing this out, put it to action. Keep track of all your spending for one month. Save all your receipts, even for minute items, and save all of your bills and indicate when you have paid them, to establish when you will need to set aside money and when you can afford to be a little more extravagant in spending.

After that month is over, check your spending and savings against your plan, and readjust it if necessary. Also make sure to factor in any money you have coming in from other sources, such as birthdays or holidays, if possible.

Remember to always leave wiggle room in your budget for emergencies that might arise, such as car problems, medical appointments, and just the general rainy day. While you might have been able to rely on mom and dad and professors to help you out beforehand, being on your own can be daunting.

But, it can also be a lot of fun. Start a fund for something that you enjoy saving for, such as a big screen TV or winter trip. It will help you establish good savings habits as well as reward yourself for being a "responsible adult."