If you’re just starting a new job, budgeting can be a challenge. Our financial advisors offer key ways Grownups can budget their paycheck toward their goals.
Regardless of age or work experience, Grownups often find it challenging to budget their paycheck. Our financial advisors have experienced this frustration first hand, so I went to them with a few questions specifically for those new to budgeting.
Ready to budget? There’s an app for that.
“Which tools are out there for budgeting my paycheck?”
“LevelMoney.com is a really easy-to-use budgeting app,” says Rachel Rabinovich, CFP®. “By linking your bank accounts, it tracks your spending, predicts recurring expenses, and gives you a ‘free to spend’ amount each month. It’s a great way to plan out your monthly spending so you can take care of those bills, work toward your goals, and know how much you have left to play with.”
“Mint.com is great for people who want to take a deep dive into their spending habits,” says Ariel Anderson, CFP®. “In my opinion, it becomes more helpful the longer you use it. You want to get to the point where you can start to identify spending trends and pinpoint any trouble areas. For example, I was surprised to learn how much I was spending on Uber! Gaining insight like this allows you to make meaningful adjustments to your budget.”
Naturally, not every app suits every personality. Play around with what’s available to see what suits you.
“If you really want to dive into your budget,” adds Tyler Dolan, CFP®, “try You Need A Budget (YNAB). It has sort of a cult following. Some Grownups love it. You can view things much more granularly with YNAB than other apps. You enter your monthly income, then you and the app work together until all of your expenses and savings goals bring that income number to zero. By using YNAB, you’re allocating every dollar toward a specific expense or goal.”
“If apps aren’t your thing, or you simply don’t know where to start, – consider paying yourself first,” says Anderson. “Start small by transferring $50 from each paycheck to savings. Treat this like an additional bill each month. If $50 feels comfortable, bump it up. The main point here is that you intentionally save something each month before spending on the fun stuff.”
When it Comes to Your Budget, Look at the Big Picture
“I’m just about to change jobs. How do I budget my new paycheck?”
“A great resource to check out is Paycheck City,” says Rabinovich. “It offers a variety of different tools to help you budget that new paycheck. Their salary calculator helps you figure out what your net (or take-home) pay will be. In addition to taking out your taxes, you can add payroll deductions, like your 401k contributions. You’ll have a good idea of where you’re starting as you begin to put together your spending plan.”
“I’m graduating this spring and getting ready to enter the workforce. I’ve never gotten a regular paycheck before. How do I budget it?”
First and foremost:
- Take advantage of your company’s 401k match (if applicable), and maximize the match—otherwise, you’re leaving money on the table.
- Then, determine what your actual take-home pay will be.
- From there, outline your monthly expenses and see what your cash flow is.
- Set priorities (e.g., emergency fund, increase savings, pay off debt)
- Get going!
“Separate your savings from the rest of your money,” Rabinovich says. “Direct a portion of your paycheck to a savings account at a different bank. Create an extra step to help you be more mindful before dipping into your savings account.”
Budget to Treat Yourself
If you’ve budgeted for your monthly expenses, put money toward your emergency fund and savings, and still have some money to play with, take what’s left and embrace your sense of adventure and fun.
Whether you’re just about to start your first job and need to learn how to budget between paydays, or you’re about to see your finances change because of a new role, don’t get overwhelmed. “It’s OK to budget by trial and error,” says Dolan. “You might not find an app or system that works for you on the first try. There are tons of methods out there, so try a few, then stick to one that feels right.”
“Most importantly, don’t set a budget that’s impossible to keep. If it’s unrealistic, it will be too easy to fall of track. Build in room for the fun stuff that makes you happy,” says Anderson.
A lifelong traveler and bookworm, Sarah spends her days thinking of new ways to explore and tell stories.
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While we hope the information and opinions offered by the author in this article are useful, it’s only intended to provide general education and it’s not intended as legal, tax, or investment advice, and may not apply or be useful to your specific financial situation.