Budgeting Tips to Help Pay Off Debt for the Post Grad
Posted on April 5, 2017
This blog post was written by Intern Queen Alumni Ambassador Saya Arakawa, a 2012 graduate of UCF and current On-Air Promotions Planner at NBC Sport Golf Channel.
Throughout college, it’s engraved into our minds on how to find the right career path and what resources to use to help you get your dream job. What they don’t emphasize on is how to transition from the low-income college student to a budget-conscientious graduate with an entry-level pay. After college, there are bills, student loans and expenses that you are now overwhelmed with. Below is a breakdown of some tips and tricks to help you budget and to pay off debt as quickly and as stress-free as possible.
- 50/20/30 Rule
With this budgeting rule, it helps you prioritize your money in a way that you still get to spend money on yourself, so you don’t feel like you never get to reward yourself for all of the hard work that you do. It helps you to develop a spending plan that is reasonable and that you can live comfortably with.
Essential Expenses should be 50% of your budget: Rent, Transportation, Utilities, and Groceries.
Financial Priorities should be 20% of your budget: Student Loan Payments, Savings, 401K, or Credit Card Payments.
Lifestyle Choices/Entertainment should be 30% of your budget: Restaurants, Shopping, Activities, and Fun Spending.
- Pay off the debt with the highest interest
Though this may seem obvious, most recent graduates aren’t aware of which of their debts or loans has the highest interest rate. I had four loans/credit cards (Student Loan, Credit Card, Car Payment and a Tires Plus Credit Card) coming out of college. Though I would pay more than the minimum payment when these payments were due, I didn’t think to research which of these credit cards I should pay off first. Look at all of your credit cards and loans and whichever has the highest interest rate you should work on paying that one off first. After I did my research, I found out my car payment had the highest interest rate, so I worked on paying that off first. I am proud to say I now have one less payment I have to worry about.
- Make a budgeting chart using Numbers or Excel
This will be great if you’re a very visual person. I’ve learned that I’m more conscientious of my money when I see it all laid out and I can see where a majority of my money is going. Numbers has a Budget template that I used to start laying out all of my expenses and spending – Excel works as well. I have three tabs: Overall Spending, Monthly Breakdown, and Paycheck Breakdown.
In my Overall Spending tab, I have a table laid out by pay period of what expenses need to come out per paycheck. This is to give me an idea of which paychecks are my “good” paychecks and which are my “bad” paychecks that a majority of my bills need to be paid from. The columns are labeled by pay period dates. I get paid bi-weekly on Fridays, so each column is the date for which my paycheck comes in. Then, the rows are organized by my expenses in the order of which they are due: Rent, Electric, Tires Plus Credit Card, Car Insurance, Cable,
Student Loan, Gas, Groceries, Misc., and Savings. For Groceries, Gas, Misc,, and Savings, I allot a certain amount each paycheck. I plug in the amount for each expense and in the paycheck that it will come out of. At the last row of each column, I have a totals box that adds up all of my expenses that pay period. Below that box, I have another box that subtracts the total amount of my expenses from the total amount of my paycheck to show how much leftover money I have as cushion.
The Paycheck Breakdown tab, I have a table for what I spend that paycheck. The first column is labeled for Date of Purchase, the second column is Place of Purchase (Target, Redbox, Rent, etc.), then the following columns are listed by the Expense Category (Rent, Groceries, Bills, Restaurants, Misc., Savings, etc.). In those categories, I put the amount of money I spent in its allotted category. So, for example, if I went to Publix for groceries, I would put $30 under the Groceries column. At the bottom of those columns, I have a totals amount. At the last day of the pay period, I refer back to my “Overall Spending” tab and make sure I didn’t overspend in any of the categories based on the amount of money I allotted for each category. After I did this, I started noticing that I was spending too much money on groceries for all of the little trips to Target and Publix I would go on my lunch break. Another visual tool that I use is I highlight my expenses in three different colors based on the 50/20/30 rule (Blue for 50, Purple for 20, and Red for 30). I was starting to notice a lot of my expenses were highlighted in red, so that was another visual indication that too much of my spending is going towards Lifestyle purchases.
For the Monthly Breakdown tab, this is just like my Paycheck Breakdown tab, but by month, so I can see how much I am spending per month on Lifestyle and Essentials purchases.
- Keep up with your spending and budgets
I check my Budgets sheet every day. When I get home from work, I open up my Budgets sheet and enter in all of the purchases, if any, that I made that day. If you constantly look at your budgets and spending, you will be more aware of where your money is going, how much you have to spend, and when you need to stop.
- Mint App
Mint is an amazing budgeting app, owned by Intuit, that you can also use to help track your expenses. You just sync in your account information, loans, and credit cards and it automatically sorts your purchases into the allotted category (Bills, Groceries, Misc). You can note how much money you have per month to spend in those categories, and it will send you emails when you’re getting close to that budget. I use both Mint and my Budgets sheet, so I am constantly aware of my spending.
- Subscribe to LearnVest
I receive the LearnVest e-newsletters daily. Each newsletter has tips, tricks and advice for budgeting, saving, taxes, banking, and investing – pretty much anything and everything you need to know about finances. Growing up and in college, I never really focused too much on saving and budgeting, so these newsletters are a great way for me to learn new things on investing and saving that I never learned.
- Freezing your credit limit
When you have a credit card, banks will increase your spending limit without your permission. Make sure to note to your issuer that you want to freeze your spending limit when you open a credit card. That way, you won’t crawl into more debt. The more “spending money” you have on your credit card, the more you think you can spend. That is not the case with credit cards. It’s better to be safe and freeze your credit limit so there are no temptations.