Budgeting Your Post College Expenses
** The following article is for those who have already calculated their Nitro Score. If you haven't done that yet, check it out here (score.nitrocollege.com).
Now that you know your NitroScore, here's...
How to Create a Budget Once You Know Your Take-Home Pay
Way to go! You are now officially thinking about--and planning for--your future. Knowing your choice of school and your major have given you your Nitro Score, enabling you to predict your monthly, post-tax take-home pay. Which begs the question...will your take-home pay support your lifestyle?
What Are Your Expenses?
Some of the expenses you encounter after college will be familiar to you; others, you may be experiencing for the first time. There are different types. Some expenses are recurring, others are occasional. Some will be a fixed amount, others will vary.
So what, exactly, are the line items to consider in your post-grad budget? Most likely, if you're living outside of your parental home, they'll boil down to these:
- Rent (or mortgage): This will be the most significant amount in your budget. It's a fixed, monthly expense meaning you'll know exactly what it will cost you and you can plan accordingly. Apartment sharing is a way to help defray this cost. Average monthly rent: $634. My expected rent: ________.
- Transportation: Unless you live in a city with good public transportation, a vehicle will be an inevitable expense. You have control over this, though, based on what make and model you choose (probably a super-nice ride right out of school is not the way to go) and whether you lease or buy. Each of those options becomes a fixed monthly expense, with the lease being more budget friendly at first; ask about your financial responsibility when the lease expires. Buying a car has a greater monthly impact, but is a fixed amount for a defined term. Take care of that car in the first five years, and you might get another five or ten out of it without a monthly payment. Average monthly transportation: $211. My expected car expense: ________.
- Food: A weekly variable expense, and one that you can control. Life speeds up but your meals don't have to. It's going to be a lot more affordable for you to take your lunch to work and make your own breakfast and dinner. This also enables you to eat healthier, if you take care in what you buy and make. Even if a recurring expense varies, you can set a limit for yourself per category. Your grocery bill may differ slightly from week to week, but if you know you're not going to spend more than $X, you're better prepared when it comes to planning and spending. An average monthly food budget: $217. My expected food budget: ________.
- Utilities: A monthly variable expense, mostly under your control. This category includes electricity, water, and heat (which may be included in your electricity). Common sense will help here: if you're not home during the day, no need to run the AC or the heat at full blast. Invest a few dollars in a thermostat that will let you schedule temperatures based on the time of day. As for water, avoid long showers and pay attention to drips or anything that's leaking. Be proactive to avoid big bills. In some instances, your rental may include utilities--but still be responsible. If you abuse them, your rent could go up. An average of monthly utility bills: $211. My expected utilities: ________,
- Healthcare: Another necessary, mostly fixed expense. With luck your employer will have a plan and you'll contribute directly from your paycheck. If you prefer the public option, you can negotiate your level of coverage. An average monthly healthcare contribution: $222. My expected healthcare cost: ________,
- Entertainment: You put in the work at school, you put in a solid day at your job. You've earned some fun. Absolutely. These costs are something you can control but they're also always variable. We're referring to happy hours, meals out, concerts, sporting events, or movies, and this category can have a serious impact on your discretionary cash. In the early years of paying down your loans, you might want to keep these expenses in check as best you can. An average monthly entertainment budget: $206. My expected entertainment budget: ________,
- Other: There are predictable expenses such as your mobile phone, vehicle registration/inspection, insurance, and professional organization memberships. You could even include gifts for birthdays and holidays here. Some of these are fixed, some will be variable, but they should all be budgeted. Unexpected expenses can be anything from auto repairs to medical costs, and they'll always be variable--which is why you may also want to budget savings each month. Simply designate a fixed, recurring amount from each paycheck's discretionary cash and bank it. This money will come in handy when unexpected expenses present themselves. Average other expenses: $424. My expected other expenses: ________,
What's the Total?
Deduct your expected expenses from your Nitro Score take-home salary. Will you earn enough to support your lifestyle? Yes? Great. If no, you can use the Nitro Score Calculator to juggle the variables: a different school might be more affordable. A different line of work might pay you more. It costs nothing to predict your future options.
The At-Home Factor
If you live at home after graduation--which is quite common--that's a perfect opportunity to bolster your savings and pay down your debt. Even if you're paying a modest rent to your folks, you should be able to set yourself up for later success. If you think you'll be in this situation, factor that in when considering your future budget.
Using your NitroScore to project your earnings is the first step to thinking about your life after college. Budgeting will help you be more knowledgeable of--and responsible with--your finances. You’ll also be more in control of your financial future.
Note: The average post-college expenses cited are from Kiplinger.com and from a Consumer Expenditure Survey published by the Bureau of Labor Statistics.