One thing I continually fail at is managing my money. Being fortunate enough to come from a family who has the ability to be financially supportive, I never conquered following any of the personal budgets I tried to set for myself. Often times, I'm the one out with friends offering to pick up the tab to avoid awkward situations of who doesn't have enough cash and who's going to pay back whom, etc. I guess the thought of managing money terrifies me; it's so. . ."adult" and "real world". (YIKES). However, with graduation fast approaching, I need to start securing my future.
I have this grand notion in my head about moving to New York City, hitting up happy hour with my kappas, lounging at the hottest club, attending broadway shows every weekend...so beautiful. Unfortunately, once I start crunching the numbers, this notion quickly turns into a far-off, very distant dream. Add onto that the fact that I'm already in debt from not watching my spending, and I've really managed to create a recipe for financial disaster. Based on recent conversations with professors and classmates who are searching for jobs, let's assume the following:
- starting salary for entry level communications: $35,000-45,000 (Pittsburgh)
- if i took that exact entry level position and was working for a company doing the exact same thing, but in New York City, I would make: $43,012.
- average cost of living in new york city: $62,179
- that means I'm already roughly $20,000 under
and if that's the case, it wouldn't be long until reality decided to serve me one swift bitch-slap across the face.
According to Suze Orman, Oprah's financial guru, there are
nine simple steps you can take to start ensuring your future financial security.
- save a little bit at a time
- have a little self-discipline
- automate your savings into a Roth IRA or other financial goal
- max out your company's 401(k) match
- invest in a Roth IRA
- Subtract your age from 100 and put that much in stocks; as you get older switch (so 100-23 = 77, meaning 77% stocks, 23% bonds, age 40, have 60% stock, 40% bond, etc)
- buy life insurance to protect your loved ones
- make sure you have a revocable living trust, a will, and two powers of attorney for finances and healthcare decisions
- add a 13th mortgage payment/year to pay it off fives years quicker
Although I'm not sure how much the last 3 apply to me at this point in my life, I think the first 6 make perfect sense. Personally, when starting out, I think it's more important to focus on creating a budget for yourself, creating an emergency fund, and then worry about saving for other future expenses.
For graduation, my mom bought me
On My Own Two Feet: A Modern Girl's Guide to Finance. Now, I've read a lot of "personal finance books" and this was the first one that made the most sense to me. Very readable and easy to follow, the two authors (both MBA graduates from Harvard Business School) walk you through everything from setting up a budget to investing, to how to break down your paycheck so that you're getting the most out of your money.
Chapter 5 is all about budget basics. According to these two lovely ladies, you have you inflow, or income (salary and any dividends, cash gifts, etc) and your outflow (gross income - income tax or roughly 25% of total income).
For example, let's go back to the starting salary for an entry level position in communications. We'll low-ball it and go with $30,000. According to one of the principles in
On My Own Two Feet, you should divide your expenses accordingly:
- Starting Salary $30,000
- - 25% for income tax ($7,500)
- - 15% for savings ($4,500)
- - 15% for FUN aka shopping sprees, manicures, tanning, vacations ($4,500)
- and the 45% that's left--or $13,500--should go towards your foundation expenses such as groceries, shelter, routine bills, gas, insurance, and other essentials.
So, $30,000/yearly is roughly $1200 per pay period (every two weeks), or $2400/month, $1,080 of which goes towards ESSENTIALS or foundation expenses.
Sounds doable, right? *right* I'm going to hit up that Sephora sale to get rid of this headache from all that number crunching. . .
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