Start saving now.The broad facts of income inequality over the past seven decades are easily summarized: It doesn’t matter how much you make, you can find savings somewhere. Young professionals usually have the mindset of “I’ll save later,” but it never happens. The sooner you begin saving, the better off you will be. This will come in handy when making the above purchases. Combine this monthly savings with the built-in bi-weekly savings and you have saved $15240 in one year. I would recommend using this leftover $884 as savings. In just a few short years (maybe sooner than you think), you will have to make some major purchases. If you don’t have $20,000 sitting in your savings account, then the answer is no. Instead of asking if you can afford $300, ask if you can afford $20,000. Honestly, you can probably “afford” anything if you break-down the payment into monthly installments. They see the $884 leftover each month and think that this means they can now afford a car payment of $300. Unfortunately, here’s where most people mess up. And here’s where you can really have a positive impact on your future. Here’s where things start to look differently between each guy. Maybe you aren’t making $60,000 and your rent is much lower. Regardless of your situation, the goal should always be to have your income be as high as possible and your expenses as low as possible. Maybe you have a horrible driving record and your car insurance is double what I have listed. Perhaps these numbers look similar to your situation or perhaps they’re far off, but I assume most guys have these 6 expenses. Rent: $1100 (includes cable/internet/utilities).401(k) Contribution: $200 (Assuming your company matches up to 4%).Monthly Income: $4614 (Remember we are budgeting around 26 pay periods) This simple budgeting tip just saved you $4632 in one year. If you get into the habit of budgeting around 2 paychecks, then this 3rd paycheck will be a windfall – and should be an easy way to save. But, there will be 2 months out of every year that you receive a 3rd paycheck. On average, you’ll receive 2 paychecks each month. This means, more than likely, you will receive 26 paychecks in a year. Most people at most companies receive paychecks every 2 weeks. Paychecks can come once a month, twice a month (bi-monthly) or every 2 weeks (bi-weekly). Thanks to taxes, health insurance and several deductions – you probably make 70% of this number. People that make $60,000 think they can budget around $5,000/month. This is probably the biggest budgeting mistake I see. Tip: Just because you “make” $60,000/yr doesn’t mean you have $60,000/yr to spend. This should be used as an outline rather than a replica. If what I say doesn’t match up with your life, then adjust accordingly. Because of this discrepancy, I will have to make some major assumptions. Brian may have a starting salary of $40,000 and have $100,000 in student loan debt, while Bill may make $80,000 and be debt-free. Expenses of one 24 year old can look nothing like the expenses of another 24 year old. Major AssumptionsĮverybody’s financial situation is different. If the latter is your cup of tea, then check out EveryDollar, You Need a Budget (YNAB) or Mint. You can also review your investment portfolio and it will tell you how much you’re paying in fees. You can manage your cash flow, see where your money is going, view your spending in categories and track your net worth.I, personally, prefer the former and highly recommend Personal Capital. One is where you ensure your income (money coming in) is greater than your expenses (money going out). The other is where you watch every single dollar you spend and give it a purpose. There are two different types of budgets. Choose an appropriate asset allocation.ĭon’t over-complicate things.Save for things you want rather than relying on credit.Of the three, which do you think is the best? If you chose the last, please continue reading. Ignore them and pretend they aren’t real.The bills that mom and dad used to cover (without your knowledge) are now directed to your mailbox. The increasing inflow can be extremely exciting, but only if it exceeds the increasing outflow. The transition from college student to young professional can be one of the most fun times in your life, but it can also be a time of stress.
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