Budgeting after getting your first job

Congratulations on getting your first job! Nothing feels better than getting that first paycheck to reward your hard work, and it can be tempting to spend it all on things you want, but don’t necessarily need. Yes, lots of freedom comes with earning your own money — however, so does responsibility.

But fear not! We have all the tips and resources right here to help you budget your new funds effectively. And yes, don’t worry — we’ll leave some space in there to reward yourself with those nice things you don’t necessarily need.

Calculate your earnings

To effectively manage your money, you have to know how much you’re making. For salaried workers, earnings are easier to calculate since salaries are a fixed amount that is divided equally throughout the year. Salaried workers are typically paid semi-monthly, or twice a month. For hourly workers, however, paychecks can be much less consistent. While typically paid out weekly or biweekly, it’s not always certain how many hours you will work in a given week, making each payday fluctuate.

So, if you’re earning by the hour, how do you know how much income to expect? One best practice is basing your calculations on you working the least number of hours possible. For example, if you typically work anywhere from 10-20 hours a week, plan your budget around working 10 hours a week — that way, you won’t overestimate your income.

Lastly, remember that taxes and other deductions will be taken out of your paycheck. For instance, if you work 20 hours in a pay period at $15/hour, you won’t get $300. That amount would be your gross income — once all deductions are subtracted, you will arrive at your net income, also known as take-home pay. (Need help interpreting your pay stub? We’ve got you covered.)

Calculate your expenses

Once you know how much you’re making, you’ll need to subtract how much you’re spending. There are two main types of expenses: fixed expenses and variable expenses. Fixed expenses are paid at a fixed rate on a set basis. A common example is rent, which is usually paid every month at an amount that doesn’t change.

Most expenses will likely fall under variable expenses, which are harder to calculate due to their unpredictability. Some of these expenses vary in amount but are paid on a set basis, like utility bills that fluctuate in price but are paid monthly. Other variable expenses vary in both amount and frequency. For example, you could get fast food with friends seven times in September and only twice in October, with each meal coming out at a different price.

So, if most expenses are variable to some degree, how can you stay on top of them? You can quickly get a general idea of how much you’re spending by looking at your transaction history online on an app such as UBTgo. This will show you a day-by-day breakdown of every transaction on your account.

Once you see all your expenses, separate them in two categories of “needs” and “wants.” As a rule of thumb, “needs” should be limited to 50% or less of your take-home pay, and “wants” should be limited to 30% or less of your take-home pay. The remaining 20% should go toward savings and/or debt repayment. (Check out our handy guide for more info on how to tell your needs from your wants.)

Savings and debt

You may have heard of the phrase “pay yourself first.” This is an important concept when it comes to financial preparedness. A savings fund can help you get through unexpected hardships, pay off debts before they accumulate, and make bigger purchases that require money to be set aside.

• Start by setting part of your paycheck aside: As we mentioned before, 20% of your take-home pay is a good amount to shoot for when it comes to saving. You’ll want to choose wisely when it comes to savings accounts, picking the one that best suits your specific needs. To see UBT’s savings account offerings, click here.
• Set goals for yourself: An end goal or checkmark can be a huge help in practicing saving. Whether it’s a new car, laptop, or gaming system, giving yourself a specific goal can provide a tangible objective to save for. These goals can be much smaller, too — for example, a great starter goal could be to reach $500 in savings.
• Only dip into your savings when you need to: While your savings account is there to help you make big purchases, it’s also there to help you cover any unforeseen hardships or debts. If debts and expenses begin to accumulate, interest fees can make a small problem turn big quickly, whereas if you stay on top of saving, interest will work in your favor.

Ultimately, when budgeting, it’s important to stay realistic, knowing how much you’ll make and how much you’ll spend. Once you know that, you can allocate any leftover funds toward your needs, savings, and of course: the fun stuff you’ve earned from putting those hours in.