After College Budget
Payday: Your budget must start with your income. For the purpose of this budget, the only form of income is going to be your monthly paycheck. This is your monthly salary before anything has been taken out, such as taxes, retirement contributions, and health & dental benefits. I found this Salary Finder (https://www.careeronestop.org/Toolkit/Wages/find-salary.aspx) website helpful in researching career income information. You probably want to use a salary that is in the low range as that will be more realistic right out of college.
Also make sure to choose the most realistic location for you! Choose a state, or even a specific zip code, where you plan to work or could see yourself working right after college. The more detailed you can be, the more accurate your future budget will be!
Make sure to divide this annual salary into monthly income, for example $48,000/year would be $4,000/month.
Retirement: A large number of employers will match an employee’s retirement contribution up to a certain amount, which varies greatly and depends upon each employer. This is an important item to consider when looking for a job. Saving for retirement, as you have learned, is extremely important to start early because of, not only the potential employer match, but also the time value of money. You want to contribute at least enough to maximize your employer match because otherwise you are missing out on free money! This contribution is made pre-tax.
So, for this section, choose a percentage of your gross monthly income to put towards retirement. For the sake of this assignment, we will say a minimum amount to maximize the employer match is 5%. (example: 5% of $4,000/month would be $200/month towards retirement). But the percentage is your choice (as long as it is not less than 5%).
Health & Dental Insurance: Health and dental insurance is often offered by your employer and is deducted from your paycheck pre-tax. Typically, the employer will pay a portion of the premiums and also require you (the employee) to pay a portion of the premiums. The premiums you pay with each pay check reduce your taxable income.
Premiums and benefits will vary, so do some research to see how much you think you would have to pay for health and dental insurance each month. It definitely changes as your age changes, and as you add dependents (spouse, children)! I used www.ehealthinsurance.com and found health insurance policies for $200-$300/month for a single 20-year old, and dental insurance plans for $20-$40/month for a single 20-year old.
Taxes: For federal taxes, use the TaxAct Calculator that we used in the Taxes section in week 3. I have provided the link for you again below. Make sure to use the year 2022 and use your taxable income, not your total income.
I have attached the spreadsheet that you used in the week on taxes to this assignment. The link for the TaxAct Calculator is below so you can calculate your taxable income.
Remember to make sure that your health & dental insurance numbers and retirement contribution numbers match on the taxable income spreadsheet and your after-college budget spreadsheet.
Also remember to calculate your monthly tax amount instead of using the annual tax amount.
For state taxes, since we did not go into depth on how to calculate them, simply use $252 for the year ($21/month). This is a rough estimate and average, so note that if you have a low income, your taxes will most likely be lower than this, and if you have a high income, your taxes will most likely be higher than this. Also note, if you chose to live in a state that does not have state taxes, do not include the $252 in your calculations. Remember which ones those are? I would not recommend choosing one of these states to live in simply because you would not have to pay taxes as this is supposed to be a real-life simulation, but please feel free to choose one of these states if you could legitimately see yourself living there (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming).
Rent: Typically, students are unable to afford to buy a house immediately after college. So for this future budget we will assume that you will be renting an apartment. Even if you plan on moving back in with your parents after graduation, please complete this portion…you don’t want to live with Mom & Dad forever, do you?! Use the website www.myapartmentmap.com/rental_data to find the right monthly rental rate for you. You can use a state average, or get as detailed as a zip code! (Keep in mind that you could reduce this cost by living with roommates, but this is never a sure thing, so it’s good to know how much you can expect to pay by yourself).
Utilities: You are usually required to pay utilities yourself, but sometimes some of the utilities may be included in your rent. This is another thing to look for when finding an apartment. Do some research to find how much you can expect to pay toward utilities. Two good website to use for this section are Apartment Ratings(https://www.apartmentratings.com/renters-library/breaking-down-the-average-utility-costs-per-month-whats-normal.html) and Zillow Porchlight(https://www.zillow.com/blog/rules-of-thumb-for-estimating-apartment-utility-costs-100024/). If you live off campus and already have an idea for utilities, go ahead and use that. Be sure to list which utilities are included in your final number.
Student Loans: Here it is…the dreaded cost…student loan repayment. Just kidding! It won’t be so bad now that you know what to expect and can plan for it!
If you do not have any student loans and do not plan on using any for the remainder of your college career, great! Do not enter anything here.
If you have borrowed student loans, then you should be able to find a monthly payment amount from your Electronic Loan Counselor assignment in Week 6, or use the counselor tool again in GradReady(https://gradready.com/sponsor/css) if needed.
Transportation: Your choice of transportation (which car to buy) is extremely important, especially right out of college. The payment amount will vary depending on the size and interest rate of the loan, and the insurance policy. Remember, this is a personal choice. You can always purchase a cheaper car!
Use Kelley Blue Book at www.kbb.com to price out a car that you may want to purchase after college. Make sure to divide the price into rough monthly payments, and remember there will be interest!
If you already make monthly payments for a car, and you plan to keep that car after you graduate, go ahead and use that monthly amount.
If you have a car but your parents make the payments, ask them what they pay monthly, but make sure to account for higher insurance if the policy is under you versus under your parent. Insurance policies typically cost more the younger you are.
If you plan to use public transportation, which is a great option, please still complete the section of the budget so you are aware of what a car expense could look like.
If the car you are currently driving is paid in full, make sure to include your insurance amount here. (An example amount here is $320/month for a used 2012 Toyota Camry, which includes $70/month for insurance).
Cell Phone: Cell phones have become an essential part of our everyday life to stay connected. Costs will vary depending on your provider and the number of people on your plan. If you currently make monthly payments for your phone, use that amount. If your parent makes the payments, ask them how much they pay, but remember to account for the number of people on the plan. Your rate will vary depending on if you stay on the same plan as your family or go off on your own.
Entertainment: Of course you will need to have money for entertainment! Balance is an important part of a healthy lifestyle, and play is just as important as work. This category, however, is not going out to a movie or concert. This section is for you to budget the monthly fixed expense you will have for entertainment, such as internet, cable, dish service, Netflix, etc. Do some research to find the cost for the type of entertainment you would like to have available to you after you graduate. Can you live on Netflix only as you did as a college student?
Savings: Here is where we include savings as a part of the budget so you do not forget to pay yourself. Choose an amount to put in this category. This includes money towards your emergency fund and other general savings of your choice. This is your choice to put here what you think is best for you, but the general recommendation is a minimum of $100/month.
Philanthropy: Philanthropy can be defined as “the desire to promote the welfare of others, expressed especially by the generous donation of money to good causes,” so in other words, charitable donations. This is an important category to have in your budget because it is easy to forget, or run out of money and never give to where you would like. You can put any amount you choose here, and remember this would include donations back to your alma mater (CSS!) or church donations.
Food: Groceries can be quite a large expense, so we are going to make it a separate item on our budget. The average person spends about $200/month on groceries, but you should have a good idea of what you spend after tracking your spending.
If you are on a meal plan through the college, try and figure out either what the meal plan was costing you monthly, or how much you think you would spend on groceries had you not been on the meal plan. Use a number here that is realistic for you, but my suggestion would be to use $100/month as the bare minimum.
Miscellaneous: Really?! After all those expenses, there is still more stuff to pay for?! Yep! What about the normal items you need to live on, such as, personal products, clothing, and fun? The average person spends about $50 on personal products, $60 on going out (restaurants, movies, etc.), and $50 on clothing each month. If you have been following your budget throughout this course, you should have a better idea of exactly what you spend on these items each month. You also have not yet paid for gas for your vehicle! You will probably spend at least $50/month on gas for your vehicle, but use your specific number if you know it. Calculate this miscellaneous expense as close as you can, but it should probably not be less than at least $250-$300.
Spending Money: How much is left? Anything? Hopefully something, but make sure to include a final number. If this number is small or negative, no worries! You have all the knowledge you need to cut expenses or revise your budget as needed to make it work.
Nice work! Submit your final budget on an Excel spreadsheet.
Include a paragraph at least 100 words long describing what you learned from this exercise, what surprised you, and how doing this has allowed you to be better prepared financially upon graduation.