Just Graduated? This Is the First Money Move You Need to Make

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If you have just gotten an “adult” job, you need to take one crucial step to make sure you’re setting yourself up for the future. 

When you graduate from school, ideally you will get a job with your degree that enables you to make more money than you ever have before. You’ll be embarking on your new financial life as an official adult, and there’s one key money move you must make to set yourself up for success.

You need to make a budget.

This may not seem very desirable, since budgeting sounds like something you do to deprive yourself of fun spending. But the reality is, there are many very good reasons why making a budget should be the first thing you do — and why you should be excited to do it.

Here’s why you need to make a budget, as well as some tips on how to actually create one.

Why making a budget right away is so important

Making a budget should be the first thing you do after graduation for a few key reasons.

Budgeting allows you to spend money on things you value. A budget does not have to be a document that restricts you. Instead, you can use your budget to make sure you are spending the most on things you really value. For example, if you’ve always wanted to be able to afford to dine out a few nights a week, you can create a budget that allows you to do that while cutting back on other areas so you can afford it.Budgeting allows you to avoid debt. If you decide what you are supposed to spend on different things based on your income, you can avoid spending more than you make and getting stuck in credit card debt. Steering clear of high-interest debt gives you more money to spend, since your cash isn’t going to interest. It also gives you more financial freedom since you aren’t committing your future self to making payments for things you are buying today.Budgeting allows you to accomplish big things. If you budget to save for expenses like buying a home, retirement, or going on a big vacation, you can make sure you’re saving the amount you need to make these important goals a reality.

If you can, try to get excited about making a budget since doing so will give you the chance to establish smart money habits and patterns from the start — while also making sure you are really enjoying the money you are now working so hard to earn. A budgeting app might help with this.

How to make a budget

Hopefully, you are now convinced you should make a budget to bulk up your checking account balance and use your money for the spending you value most. But just how do you actually do it?

One option is to make a zero-based budget.

With this option, you figure out how much income you’re earning and budget for every single dollar of it so you have $0 unaccounted for in the end. You should create a line item in your budget for all different categories of spending and saving, such as saving a certain amount for retirement and a home down payment, as well as specifying you want to spend a certain amount on costs like housing, car payments, gas, groceries, and dining out.

The benefit of this approach is you get to determine exactly where each dollar goes, which can be helpful as you’re figuring out how to best use your new salary. While there are other budgeting approaches you may decide to adopt later, it’s often best to go into more detail first until you get into the swing of things with your new salary. Down the road, you could consider switching to a 50/30/20 budget that sets aside 50% for fixed spending, 20% for savings, and 30% for discretionary expenses.

If you follow this tip, your budget can help set you up for the long-term financial success you deserve as a new grad.

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