Personal Finances
I am by no means a financial advisor or anything of the sort. This is simply what has been working for me.
Have you ever describe yourself as a “poor college student”? I know I used to, even though during the school year, I had a campus job that paid $10/hour. During summer, I had a job that paid about $8/hour. Where did my money go? Probably mostly food, but I will never truly know. I want to help you, the college student or recent grad, better manage money.
Remember: I am by no means a financial advisor or anything of the like. This is just simply what has been working for me.
I graduated a little over a year ago, and since then, I have been pretty obsessed with my own personal finances. This obsession came about, because I don’t want to worry about money in the future. I want to eventually own a house, have kids, be married, and travel the world — all the good things in life. I read many articles, one of which suggested that guac with toast was preventing me from owning a house. I eventually landed on the 50/30/20 rule. This rule allowed me to be honest about my spending and savings.
I am in a fortunate situation, where I do not have any school loans or other debts. Similar to music, the rule can most definitely be broken to fit your needs, and I will try my best to explain how and where you should break the rule in order to reach your goals.
The 50/30/20 Rule
As previously stated, this rule is only meant to be a guide — you are more than welcome to adjust these numbers in such a way that benefits you.
50% Essential
This is the portion of your income that goes towards ESSENTIALS — things you NEED to live — housing, transportation, and food.
30% Personal
The personal portion: my personal favorite (PUN intended). In this portion, you can include Netflix, Spotify, Starbucks, and going out to eat with friends. All of the fun things go here. Some people include their phone and internet bills. However, I am of the belief that internet and phone are essential. This is also the part of your income where you can make cuts, in order to make higher monthly payments on loans.
I use the free Spotify account — I really do not mind ads. I also try to meal prep, this helps in not spending too much money on food (It is also a lot healthier, if thats your thing). Money that is left over from here I put into my savings. If you have loans, you might want to use leftovers for loan payments.
20% Savings
Saving is the thing everyone wants to do, but can’t quite grasp how to do it. If you have loans or help your parents out, this part might be tricky. There are a few ways that will make this part of money management a lot simpler.
- High Interest Savings account — Currently I am a huge fan of Ally Savings Account, it has 1.35% APY. TWO WORDS: Compounding Interest
- Direct Deposit — Try and see if your place of work allows you to split your check, have 20% of your check go straight to your savings.
- Investments — Most people think stock market, I’m new to this so I have been sticking to ETFs. However if the stock market isn’t your thing, you can open a retirement account, such as a 401K. If the company you work for does a company match on retirement, you should sign up. 401Ks are given through employers, if you are in college and you are earning a paycheck, do not fret, it might be worth stopping by the bank and asking about Roth IRAs and Traditional IRAs.
Budgeting
For budgeting I use Mint, I mostly use the app. Your first step before budgeting is learning what you spend your money on. Observe your spending habits for at least 2 months. After learning your habits sit down and create a budget around your average spending. Anything I spend monthly I do budget for separately. The personal part of the rule I like to do on a grander scale. For example instead of saying “$30 for movies, $40 food” I say “$70 for whatever the heck I want.”. Putting into a savings account, for me, became a lot easier after setting up direct deposit to it. To the left is an example of the categories I use to break up my own money.
