Budgeting
Most first-generation college students have been working for years, even before they graduate college and start earning salaries and higher incomes. Whether you were aware of it or not, you probably engaged in some type of budgeting or financial planning – knowing how much money you expected to get each month, and knowing what your bills and expenses were. You may provide for loved ones such as family members who you support financially.
Entering the world of full-time work after graduation often means earning a larger paycheck (which you have worked hard for and deserve!) It also comes with more responsibility and decisions around how and where to spend your money, and how to save for the future.
Having a budget is the best way to create a financial roadmap to meet your future goals, and to have some money put aside for emergencies and other unexpected expenses.
Making a budget starts with a conversation. You might need to include others, such as a partner or family member, in the conversation if you are budgeting together or have shared financial responsibilities. Here are some items to consider:
- What are my financial goals for this year, and in the next five years?
- Will my income be stable (getting the same amount each paycheck) or will it vary throughout the year?
- Do I plan to make any major purchases (new car, home repair, medical or dental expenses, vacation or other celebration)?
- What are my short-term and long-term savings goals?
- Am I supporting others in my family? If so, how often and how much?
Income: If you are earning an annual salary, you can expect to get the same paycheck amount each pay period. If you are an hourly worker, your exact pay may change based on hours worked, and overtime. If you are a contractor or freelancer, your pay will vary based on your projects. Track your overtime pay if you’re not sure how much you make, so that you can have a good estimate of your monthly or annual earnings.
Expenses: Have a realistic idea of how much you will spend. The best way to do this is to review all of your expenses from the past 12 months. Although we may have a good idea of how much we spend on rent and utilities, we often don’t have a good idea of how much we spend on things such as eating out, getting coffee, or needed items such as car maintenance. If you’re not sure, track your expenses so that you have a clear picture.
Here are a few categories to consider:
- Housing/bills/food
- Gas/car maintenance
- Expenses for taking care of family members
- Debt (college debt, auto debt, mortgage, etc)
- Recreational/fun
- Savings: Having savings (retirement or basic savings) be part of your expenses is a great way to factor it into your budget)
Considering a big purchase? Check out this resource guide!
There are various methods for creating, writing, and tracking a budget. Check out the resources below to get started!
- Creating a Budget and Sticking with It
- How to Budget
- Budget Planner Worksheet & 50/30/20 Rule
- Financial Planning, a Step by Step Guide
- Video: Budgeting
- What is a Budget?
Banking: Banks vs Credit Unions
Banks and Credit Unions are both places where you can store your money safely. They both offer checking and savings accounts, in addition to other financial products and services.
The main difference between banks and credit unions are that banks are for-profit, and credit unions are nonprofit. Depending on the institution, some banks are national (e.g. Chase, Bank of America) with many branches, whereas credit unions tend to be more locally based (e.g. Patelco, Redwood Credit Union, Travis Credit Union), but often share a national network with other credit unions. Credit unions tend to have a strong emphasis on serving the local community, and account owners (members) can typically join the credit union’s board of directors, whereas this is not usually the case with banks.
Whether you keep your money with the bank or a credit union is entirely up to you and your needs. You may also choose to have more than one account for different purposes. Just make sure that you are always aware of where your money is, and that you don’t have it so spread out that it’s hard to manage.
Here is a resource with more information about banks and credit unions.
There are also online-only institutions where you can have an account. If you don’t need to go into a physical location and don’t mind managing your money 100% online, you may be interested in looking into online financial institutions as well.
Be mindful of banking products and apps that advertise financial accounts or savings, but aren’t actually accredited by the FDIC or NCUA. These products sometimes operate in a legal gray-area, so if your money is lost, you may not have any way to get it back. FDIC And NCUA institutions both insure customers in up to $250,000.