This is my first official post for a blog series I am calling GPS (shorthand for Grown People Sh**), in which I share some of the challenges and adjustments I have experienced while “handling my business as an adult” after grad school. As a general disclaimer, the experiences I discuss will likely be different from others’, and by no means do I consider myself to be an expert. However, I do hope that discussing my personal situation and idiosyncratic approaches might serve as a way for others to start thinking about their own GPS, take action, avoid mistakes I’ve made, and experiment with figuring out solutions that work for them.
As I transition to a new job, I thought it would be timely to touch upon a taboo topic among friends (and sometimes partners): budgeting and managing personal finances.
When I graduated from college and first entered the working world, the concept of budgeting and fiscal responsibility completely eluded me. I didn’t have a concrete budget or long-term financial plan. At the time, I was simply drunk off of the power of financial independence– I was making more money than I had ever made before (which, in retrospect, really wasn’t much), living on my own and supporting myself, and putting away a variable, paltry amount into savings each month. My job offered health and retirement benefits that I knew little about, other than that I had them.
In terms of planning for my future, I intended to enter a Ph.D. program in about two years’ time. The job I had after graduation was very much a stepping stone towards that goal, so I figured that a substantial chunk of my savings would eventually be spent when I applied to grad school (i.e., test preparation, taking the GRE, sending test scores to schools, application fees, traveling/moving expenses, etc). In a sense, this was my “financial plan” and I was largely ignorant of other budgeting and planning I should have done, e.g. paying debts down faster, building up a true emergency fund, etc.
Once I started grad school, I was (to my surprise) making more than when I was working full-time through a combination of fellowships and teaching assignments. Admittedly, I wasn’t “balling out” with my money every month, but I was fortunate to be able to live fairly comfortably and eat well (no more microwave pizza bites!) while focusing on my studies and professional development. Despite the small bump up in income, I was still saving in an inconsistent manner and in retrospect, I wish I had been less naïve and more disciplined about putting away a larger, fixed percentage of my income each month.
It wasn’t until I was about two years away from finishing school that my friends and I had a candid conversation about our personal finances. I was surprised to discover that many of my friends in my graduate program were in a similar situation– basically living paycheck-to-paycheck, saving very little or nothing at all while living in the comfort of our small grad school bubble. However, a couple of friends had large credit card debts and undergraduate loans. One of my closest friends even admitted to usually having a zero or negative account balance by the middle of the month. Needless to say, the discussion was an eye-opener. At that point I started taking my budgeting a little more seriously and began keeping track of my spending and saving using this simple spreadsheet from PearBudget and the Goodbudget (EEBA) app on my phone. (A few friends swear by Mint, but I am on the fence about switching over to it. If you currently use Mint, I’d be interested in hearing about your experiences with it. Alternatively, if you don’t use it, I’d be interested in hearing about your reasons why.)
Now that I’m in the midst of moving on to a new job with better pay and benefits, I have resolved that I will be more aggressive and systematic than I have been before about managing my personal finances. This means creating a new budget for myself based on my anticipated income after taxes and other things we usually have to pay for (e.g., retirement, benefits, credit card balances, student loans). After calculating my monthly take-home pay amount, I created a spreadsheet to calculate my projected fixed monthly living expenses (e.g., rent, insurance, utilities, bills, subscriptions) and variable/flexible living expenses (e.g., dining out, groceries, clothing, personal care, travel). If you’re interested in calculating and adjusting how much you’ve allocated to fixed and variable expenses, the first tab of the PearBudget spreadsheet works well for this purpose.
To start, I am aiming to use the 50/20/30 guideline for my budget, which suggests that 50% of my take-home pay be allocated to fixed expenses, 20% to financial goals (e.g., savings, an emergency fund), and 30% to variable expenses. Currently, my spreadsheet indicates that my percentage breakdown is about 32/20/19. I anticipate that in the next month or so I’ll be tacking on car payments, car insurance, and car maintenance/gas payments to these calculations, which will bump my fixed monthly expenses up substantially. Depending on how the next few months pan out, I’ll adjust my budget and percentage breakdown accordingly– for instance, spending less on dining out, spending more on groceries, lowering my clothing allocation, and increasing how much I save each month.
Hopefully this description of my current thinking about budgeting is helpful, particularly if you are in a similar situation. I’d be interested in your experiences and suggestions about how to better track budgets and common pitfalls to avoid!
Some other reading and resources that I’ve found helpful: