Do you have a strategy in place to responsibly use the money from your first pay slip? Starting out in the professional world after studying is a big step and you might not be prepared for it.
Building a budget that works for your professional life is vital to staying on top of your expenses and saving money.
All of a sudden you have lots of money sitting in your bank account, potentially after a period where you were living paycheck to paycheck with a part-time job. It’s exciting to see all those funds just sitting there, and that’s exactly why you need smart money goals. Building a budget that works for your professional life is vital to staying on top of your expenses and saving money. Here are three strategies that can get you started:
1. Save one-third of your income
A good basic rule to live by is to save one-third of your income, spend one-third on accommodation, and use the rest for other expenses like a gym membership or going out for drinks with your friends. This is the classic ‘spend less than you earn’ rule where you can steadily grow your savings.
If you earn $900 per week for example, you’d have $300 to spend on rent, $300 for your utilities, subscriptions and entertainment, and you’ll have $300 to put into your bank account every week. Over a year, your savings will grow by $15,600. That is, if you stick to your budget. Emergencies will come up every now and then, but if you have a solid savings account, you should easily be able to cover the costs.
2. Work toward a major goal
Budgeting for life goals is a great strategy if you have a clear idea of what you want over the next two or three years. Say you want to put a deposit down on a house and you need to save $60,000 over three years – that’s $20,000 a year. That means putting aside approximately $390 per week, every week, for the next 156 weeks!
Work backwards from this figure and you’ll be able to figure out how much you can spend on rent and other expenses based on your income. If you only take home $700 per week, the remaining $310 is unlikely to cover your rent plus all living expenses like utilities and even public transport.
Be realistic about the major money goal you work toward based on your salary. Giving up going out for dinner might be necessary until you’ve reached your target.
3. Trim your expenses
Once you know what you spend on certain things you can figure out a way to cut your costs.
This strategy is ideal for people who already have a working budget and know where their money goes. Once you know what you spend on certain things (like power, memberships, entertainment, food etc.) you can figure out a way to cut your costs.
If you spend $150 a week on food, maybe you could buy more cost-effective items and stay away from the high-end brands. Study in Australia suggests groceries and eating out cost between $80 and $280 per week, but you can get far lower than that if you shop smart. Plan your meals for the week, take your lunch to work, and snack on fruit and leftover meals.
Learning to budget when you’re new to the workforce takes some time, but it will set you up with invaluable life skills. For now, you can avoid these money mistakes Millennials make, try one of these budgeting apps, or get in touch with BOQ to find out how we can help you get your finances in order.