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Finances

How to Budget with your First Full-Time Job

Congrats!

You’ve now successfully finished schooling and landed yourself your first full-time job. With this brand new influx of money, you may be starting to think about how you can create a budget and start saving more.

But before we get into all of that, let me say- great job. It can be hard for some to find work directly out of school. Within 2017, just over 1 million students were recorded to be attending a Canadian university full-time, while 1,574,200 jobs were created specifically for recent grads. While this demonstrates that more jobs are available than recent grads, it can still be hard for individuals to find meaningful employment right out of school.  For some new grads, they may want a certain salary that most employers are not willing to give a new employee. For others, it can be hard to commit to this new and very daunting step.

Regardless, even if your new job isn’t going to be your lifelong career, it’s still a great achievement. You now likely have a decent salary that will always be better than the minimum wage you were making at your past, part-time gigs. You also have more independence, as you don’t have the crushing weight of five courses bearing down on you. I won’t lie, work can be stressful too, but the stress can end when you come home for the day. Not to mention, receiving that pay cheque every other week makes any slight moment of stress all worth it!

The Benefits and Stress of a Salary

You now have the financial freedom to go out and see a movie, make that online purchase, and pay your bills. Hell, you can even take on some new bills now that your income is higher. While all of this sounds great, you still have to manage your finances and be careful with your spending. It’s all too easy to go overboard once those pay cheques come rolling in each month. Luckily, setting a monthly budget for yourself can be a great way to ensure you don’t end up living pay-cheque to pay-cheque.

It’s a common rule of thumb that you should have about 3 months worth of savings, to keep you going in case of emergency or loss of employment. So take your monthly expenses and try to have about three times that saved up and kept separate from your checking accounts. This will ensure that if anything drastic were to occur, you wouldn’t be stuck.

I’m not saying you can’t have fun and spend your money now that you’re on salary, but remember that with this new ability to spend, you also have the ability to save up a large amount of money. This can make putting a down payment on a house, buying a new car, or even planning your future wedding so much easier.

With all of that said, here are some simple budgeting tips to starting your personalized monthly budget:

1. What are you making each month- after taxes?

After you get your first few pay cheques, it’ll be easy for you to see what you’ll be receiving every other week. Take that amount and calculate how much you are getting in total each month.

If you’re paid hourly and not on salary, this number might be more of a general estimate. If you’re salary, then you can know for certain exactly how much you make each month. This total number is the basis for your budget and can help you understand how much you can spend and save each week and month.

Try not to look at this number as a negative thing. Sometimes, its easy to look at this total and get discouraged, as you may think you make more than you actually do. Your total take-home pay may make you realize that certain luxuries are beyond your grasp… for now at least. You’re just starting out and there’s always room for growth and promotions in your future. Just try to remember that its easier to spend less than it is to make more and over time, your savings will surprise you!

2. How much are your bills each month?

Now that you have your total take-home pay for each month, its time to do the ultimately depressing task of totalling up how much living life costs you each month. Certain bills cost the same each month and will be easy to tally, but other expenses, such as groceries and gas will vary. For those expenses, try to be as conservative as possible and come up with a higher average.

Some examples of the monthly expenses you should tally:

  • Utilities bills
    • gas
    • hydro
    • water
    • internet
  • Rent
  • Car insurance
  • Car payments
  • Phone bill
  • Groceries
  • Gas for your car
  • Prescriptions
  • Public transportation costs
  • Gym membership
  • Entertainment costs

This list is assuming that you’re renting… and doesn’t include mortgage payments or property taxes. Maybe one day when I have the millions of dollars required to purchase a home in this day and age, I can give a bit more information on that side of things… but for now, renting will have to do.

Be realistic and brutally honest with yourself on how much your life is costing you, and total up all of these costs for the month. Once you do that, you can see exactly how much you have left (hopefully you have something left!) after you subtract these expenses from your monthly salary.

This will then give you an idea of how much you can put away in savings each month.

3. Time to make a savings plans

Now that you are good and depressed about how expensive living is in this day and age… you can decide on how much you can put away in savings each month. You want to make sure that you have some wiggle room and will have some money left over to go out and maybe pay for an emergency expense. After all, making money should be a little fun. You shouldn’t feel restricted and unable to pay for things that bring you joy. If this happens, then you’ll likely just give up on saving and start spending recklessly. But try to put away as much as you can, so you can see some growth in your savings each month.

The big question is: how much should I be putting away in savings each month? There is the common belief that you should allocate 50% of your income to essential expenses (like the ones listed above), 30% for fun spending and finally, 20% of your income to savings. This allows you enough wiggle room to purchase what you need and want, and have some left over at the end of every month.

 

While this is a great place to start, you may find that your life expenses don’t even make up 50% of your total monthly income, or maybe you want to use less than 30% on discretionary spending. This formula can be changed around depending on what you need, but if you’re completely lost, it’s worth a try!

So with this information in mind, try to plan out what you need each month for expenses and what you can part with and allocate to a savings account.

4. Find a good system to track your spending and savings

It’s one thing to make a plan… and its another thing entirely to actually implement it and track that its working for you.

You can make your tracking system as simple or complicated as you want. You may decide on a detailed Excel file, which you can customize with formulas and new columns as you need. This can be great for people who need a lot of control over their tracking and are pretty handy with Excel to begin with. This also means that you have to keep all of your receipts and bills and manually enter your spending into the spreadsheet. You’ll also have to manually enter your income for each month, which can be extremely taxing for those who are paid hourly. I’m going to be honest, this is not my first option and is something I would never attempt. My boyfriend on the other hand, loves this method and finds a sick sense of joy in entering each new receipt into his spreadsheet. So do with this information what you will and try it out if it sounds like something that would work for you!

On the other hand, there are a million smartphone apps that sync with your banking app and will track the money that enters and leaves your account. You can set a budget for each area of life expenses and it will give you updates if you go over your monthly budgets. This can be a great system for people who are lazy (like me) and want another system to keep them accountable for their spending.

Some of the apps I have found to be the best include:

There are a million options, you’ll just have to look around and see what works best for you!

In conclusion…

With all of this information, I’m really hoping that creating a personalize budget doesn’t seem so daunting. You don’t have to start all of this the very first day of your brand new job, but the sooner you start, the easier it will become. Like any habit, the longer you do it for, the less you’ll think about it!

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