Now that we’ve familiarized ourselves with and armed ourselves against Ignorance, Denial and Indulgence, it’s time to make a financial plan that is tailored to your specific needs.
Now, financial goals are as individual as the people they belong to– you may want to save for something special, for the unknown, for a faraway wedding. You may want to get out of debt. You may want to construct a plan that allows for you to pay your student loans and have a social life at the same time. You may live in an expensive city and just want to pay all your bills and have enough to eat and go out once a week. You may want to re-do your entire wardrobe or take a trip to Turkey.
The first step to making your own plan is figuring out what you want to do with your life. Scary, I know. Senior year of college and the following months after getting that diploma, this thought permeates almost every moment of your existence. I know it’s overwhelming to think about, but luckily, figuring out your financial goals is a bit easier than finding out what career path you want to follow. Good places to start:
1. Pay for necessities. Pretty basic, right? You want to have shelter, warmth, running water, food, clothes and internet, right? (If you don’t, might I suggest the Peace Corps? You’ll do some great work for the world and also get some student loan forgiveness.) If you want these things, they need to be part of your financial goals.
2. Plan for the future. Start a retirement account. Contribute to your job’s retirement plan for you if applicable. Save for emergencies. Save for a down payment for a car or house. For a wedding. For kids. Investments. The earlier you start, the bigger the nest egg gets.
3. Pay for things you want. A new haircut. A new video game. A trip to Vancouver. Now that you know how to battle indulgence, hopefully this last part won’t hurt to much.
You need to create a plan now and reevaluate it once a year because things change, after all. During college the plan might focus on paying for things you want. After college, the plan might focus on paying for the necessities. A couple years after graduating, the focus might shift to planning for the future. It all depends on your current financial situation and where you want to be in a year.
Remember when I told you to figure out what your net worth was? It’s time to use that number. If it’s negative, you might want to create a plan that focuses on getting yourself out of bad debt. If it’s positive, you may want to focus on saving. If it’s really really positive, feel free to focus on accumulating. But the very first thing to do in order to create your financial plan is budget!
Prepare yourself mentally and physically to MAKE A BUDGET. Get coffee. A blanket. Your laptop. A fluffy cat. Put on Beyonce. You’re taking your finances into your hands now. This post is going to focus just on the necessities part of the budget– step number 1 listed above. The other steps will have posts of their own following this one.
BUDGET- the necessities
(Public transportation, ie bus pass, train pass, subway, taxis, parking, etc):
Student loan repayments:
Minimum credit card payments:
Other debts (loan from mom and dad, etc):
Pets (food, vet, grooming, supplies, etc):
Those are all your necessities. But where are the gym fees? The eating-out budget? The money for buying books for classes? Those are NOT necessities. Stick to the things that you ABSOLUTELY have to pay for to function. Take Baloo’s advice: “Look for the bare necessities.”
Figure out what each one’s monthly cost is by looking at past payments and receipts. Things like the electricity bill may fluctuate from month to month, so try to average and then round up to be on the safe side. If you’re share of the electric bill was $158 in July, $146 in August and $140 in September, than budget for $145 a month. Other things like rent and your phone bill will be more consistent. Groceries may be the hardest; single people usually spend $150-200 on groceries depending on their needs. I include my toiletries, household and pharmacy needs– try not to leave anything out. Think of everything you’ve bought in the past month.
Subtract your necessities budget from your income. Now, if you have more in your budget than you have money to spend on it, we need to make some changes immediately. If you have nothing left at all, or if you don’t even have enough to cover a month’s worth of living, you’re on dangerous ground–this week’s IDK Wednesday will give tips on how to fix this issue.
Now take a break. Go watch a movie with friends and wine. Or cuddle with someone. You’ve taken a huge step to figuring out your finances. What a grown up you are.