New grads need a new budget

By Danielle Lorenz in Money on August 12, 2009

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Your first new grad job will be a completely new experience for you: new responsibilities, wardrobe, hours and expectations. You will also be getting your first (or one of your first) series of substantial pay cheques that will help you into the next stage in your life.

Many recent graduates don’t know how to set a proper budget when they start their first job and this can be a problem for a couple of reasons. First, it can contribute to frivolous spending habits later in life, and second, it can prevent you from getting a good jump on saving for the rest of your life. Since you have a fresh start, this is when you should be utilizing your pay to the best of your ability.

To create a budget, make a series of lists:

list the money you owe from student loans and/or credit card debt
list your expenses for one month (including rent, clothing, transportation, food, utilities, entertainment and gifts)
list the income you expect in a month

From these three lists you are going to make your monthly budget.

Don’t forget that a portion of your pay cheque will be deducted for taxes and employment insurance (unemployment), but it’s possible there will also be deductions for health benefits, retirement plan contributions and union dues depending on your employer. Your budget should take those deductions into account and only include your net pay, not your gross pay.

For entry-level employees, a suggested spending guideline based as a percentage of your pay is as follows:

30% housing
10% utilities
10% food (both takeout and restaurant and well as groceries)
15% transportation (car loan, and/or public transit passes)
10% repaying debt (student loans and credit cards)
10% savings
5% clothing
5% entertainment
5% for car insurance and miscellaneous other expenses

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This article was written by Danielle Lorenz

Danielle Lorenz is the Editorial Assistant ("Eggtern") at TalentEgg. She has also been an Assistant Editor for the Career Incubator as well as a long-time contributer. She's a recent McMaster Alumna, having completed a second degree in English with a minor in Indigenous studies, and has previously completed a combined honours degree in Anthropology, and Cultural Studies and Critical Theory. She has been involved in numerous activities at Mac, including Welcome Week, the McMaster Students Union, the McMaster First Nations Student Association, and MacInsiders, an online news and information website for and run by McMaster students. This fall she will be embarking on a new journey at a new school, when she goes to Carleton University to begin her MA in Canadian Studies with a focus on Indigenous Studies.