Budget for College Graduates That Actually Works

Graduating college is the beginning of a new chapter in your life. You may be moving out of your parents’ house, landing an exciting new job, or heading to graduate school. Regardless, managing your finances post-graduation is crucial in navigating your new adult life. To help keep your finances in order, consider making a college graduate budget.

A budget is a financial tool designed to help you manage your income and expenses so you can stay on track to reaching your financial goals. Here’s how to create a budget as a college graduate.

How to Create a Budget After Graduating College

Step 1: Get Real About Your Income

Life post-graduation will likely come with a full-time job, often earning you more than the standard part-time college gig. While exciting to have more income to work with, it’s important to understand how much you’ll actually have to spend on a regular basis.

Remember that your salary is the amount you earn before taxes, or your gross income. Your salary also doesn’t factor in other potential deductions, such as your 401k contribution or employer-sponsored health insurance.

For example, let’s say you make $60,000 per year. You decide to contribute 10% of your gross income to your 401k, or around $500 per month. If you live in Missouri, for example, you’d take home $39,911.93 after contributing to your 401k and after tax. This averages out to around $3,325 per month.

Step 2: Determine Your Fixed Expenses

There are a variety of fixed expenses you may incur post-graduation, such as:

1. Living Expenses/Rent
2. Utilities
3. Groceries
4. Student Loan Payments
5. Insurance
6. Transportation/Car Payment
7. Phone Bill
8. Pet Expenses

Fixed expenses are those that remain the same each month. Oftentimes, but not always, they are necessary expenses, as well.

Depending on your lifestyle, your fixed expenses may differ from the list above. For example, if you are living at home rent-free with your parents, your fixed expenses may be:

1. Student Loan Payments: $250
2. Transportation Costs: $100
3. Therapy Appointments: $200
4. Gym Membership: $40

Your fixed expenses will create the baseline for your budget, coming before factoring in any “wants.”

>> MORE: Compare student loan rates

Step 3: Calculate What You Have Left

Now, subtract your fixed monthly expenses from your monthly income. What you have left over will be what you can contribute to your savings goals and nonessential spending.

For example, if you earn $3,325 per month, and have fixed monthly expenses totaling $590, you’d be left with $2,375 for discretionary spending.

Step 4: Determine Your Savings Goals

Before spending your remaining income, map out your savings goals and prioritize contributing toward them. Remember, you may have larger expenses coming up in this phase of life, such as:

1. A down payment on a home
2. Moving out/moving to a new city
3. Furnishing a new home
4. Buying a car
5. A wedding
6. Having children

Set a realistic timeline for each financial goal you have. Then, figure out how much you need to contribute toward each savings goal per month to achieve it. Subtract those figures from your remaining income after factoring in fixed expenses.

>> MORE: How to buy a house with $100K+ student loan debt

Step 5: Think: After Graduating College, What Does a Full Life Look Like to Me?

As a college graduate, for a budget to be successful, it has to support a life you truly enjoy living. While you’ll likely have several necessary expenses to put in your budget, such as rent or student loan payments, it’s important to prioritize “wants” as well.

Think to yourself: What does a full life look like to me? What do I really value that is worth spending money on?

Getting clear on what you enjoy spending on allows you to budget appropriately so you can effectively balance both “needs” and “wants.” It can also help you dodge the pressure to keep up with those around you, or spend on items or experiences you don’t value. For example, if you don’t value spending money on happy hour after work, but your coworkers do, it’s okay to order a less expensive beverage or skip out on the excursion altogether. 

Step 6: Look at Your Spending from Previous Months

To determine how much wiggle room you have to spend on “wants,” look at your spending habits in previous months. Find the average of what you’ve spent in different categories, and use that information to set guidelines for your budget after graduating college.

For example, let’s say you spent $200 on eating out in March, $300 in April, and $150 in May. On average, then, you spend around $216 per month on eating out. If that amount feels reasonable to you, use it to set your limit for that budget category.

This is also a great time to see where you can cut back. If you find yourself overspending in certain categories, be realistic about what that means for your overall budget. For example, if spending $500 per month on entertainment means delaying reaching your financial goals, it may be worthwhile to scale back your spending in that category.

Step 7: Map Out All Your Budget Categories

Once you know what your fixed expenses are, how much you need to contribute to your savings goals, and what you’d like to spend the remainder on, you can set your budget categories.

As a college graduate, some common budget categories are:

1. Rent
2. Gas
3. Insurance
4. Public Transportation
5. Student Loan Payments
6. Car Payment
7. Entertainment
8. Groceries
9. Restaurants
10. Shopping
11. Subscriptions
12. Gym Membership
13. Self Care
14. Medical Expenses
15. Donations/Charity

Pick whichever categories are relevant to you and your lifestyle. Then, assign a spending limit to each category, ensuring that all expenses, including savings goals, add up to your total monthly income.

>> MORE: Student loan refinancing: how to pay off your student debt faster

College Graduate Budget Example

With an income of $3,235 per month, your budget may look something like:

Budget Category	Amount Allotted	Spent	Left Over
Rent	$1,500
Transportation	$100
Student Loan Payments	$250
Therapy Appointments	$200
Gym Membership	$40
Emergency Savings	$500
Restaurants	$220
Entertainment	$300
Groceries	$125
Credit Card Payment	$90
Total	$3,325

As the month goes, periodically examine your spending. For example, if after one week into the month, you’ve spent $100 of what you budgeted for groceries, you may need to cut back in other categories for the remainder of the month to ensure you can cover grocery expenses going forward.

Likewise, total up your overall spending at the end of the month. This will allow you to see where you may have underspent, allowing you to direct the remaining amount to another expense such as your savings goals.

Bonus Step: Automate Your Budget

If managing your budget manually sounds tedious, consider using a budgeting platform such as YNAB or Mint. Both platforms will allow you to set budget categories, then sync your account with your bank. Then, your expenses will automatically be tracked and categorized, simplifying the process quite a bit.

Managing your finances can be complicated, especially if it’s your first time giving it a go. So, as you begin utilizing your budget, remember to be gentle with yourself. 

Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

The content displayed on this page is intended for educational purposes only and should not be taken as financial advice. Please consult a professional for personalized financial advice.