Career Article 138:
Financial Basics: Budgets for Recent Graduates

By Tamara Dowling, CPRW

If you are starting out on your own for the first time, it's important to set up a budget and begin good financial habits. It a may seem so basic and maybe even unnecessary. However, debt and mismanagement of your money can affect your ability to buy a home, take vacations and even alter your retirement plans. Here we'll give you the basics as well as a template for a simple household budget.

Where does it all go?

Little things add up quickly. If you don't believe that, keep track of every penny you spend for a month. That trip to Burger King twice a week adds up to $520.00 at the end of one year. What about a couple sodas from the vending machine --- five days a week? That's another $312.00. Eliminate those two alone and you'd save enough for a modest vacation.

When you see all the expenses, including the "little things" you may want to make changes. Maybe you'll decide instead of that daily bagel and gourmet coffee, you'll make breakfast at home. That sacrifice may be worth it, if you have an extra $780.00 to spend on your wardrobe or a new stereo.

Tracking your expenses is the first step toward defining your priorities and creating a realistic budget.

Unexpected or Unusual Expenses

Tracking your expenses for a month is a great way to identify routine expenses. However, life is not routine. Prepare for the unexpected. Here are a few examples of unexpected or unusual expenses. You'll need to examine your own life to make a complete list.

1. Car Repairs
   This will vary based on the age of your vehicle, how you care for it and how much you drive it. Ask your local car repair shop to help with an estimate. At minimum, plan for general maintenance plus save $25 a month for the unexpected.
2. Medical Costs
   Check your healthcare, dental, and vision policies. You'll want to budget enough to cover your deductible and co-payments. Be aware of what these plans don't cover. For example, you may have coverage for an eye exam by an MD but not an annual vision check by your Optometrist.
3. Holidays and Birthdays
   Set aside a little every month to spend on these events.
4. Weddings and Baby Showers
   If you are in your early to mid 20s, you can expect to be invited to a few weddings, bridal showers and baby showers each year. Being a groom or a bridesmaid is even more costly. Allow space in your budget for this.
5. Emergency Travel
   If you live away from your family, you may be called to make sudden unexpected trips in certain emergency situations or to attend funerals.
6. Office Parties
   If you work with a group of people, plan on occasional birthday lunches and group gifts for retiring workers. Depending on your office size, you can set aside 5-12 dollars per month for such events.
7. Broken Appliances
   Hairdryers, vacuum cleaners, telephones and other appliances have relatively short lives. Plan for occasional replacement purchases.
8. Change in Life Expenses
   Marriage and children are wonderful, but they also have large expenses attached. With proper planning, the expenses are manageable. Research wedding costs carefully, and make decisions about catering, photography and your honeymoon after you have planned a budget that you can handle. Children are not only life changing, but also life long commitments. Plan beyond the delivery, diapers and doctor's visits. Make sure you plan for childcare, education, clothing and a home.

Now that you've researched your expenses, you are ready to prepare your budget. If you have Microsoft Excel software, you may wish to download this handy budget spreadsheet.

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