Now that you’re earning, spend wisely

When you’ve been living on limited funds—whether an allowance from your parents, earnings from a part-time job, or some type of scholarship/stipend—it’s easy to go a little crazy when you start earning a decent salary in your first full-time job. However, a recent article from Yahoo Finance titled “10 ways recent grads waste money” provides a good reminder that financial security beings early! In today’s post I’m going to share some of the highlights with you, but I encourage you to take a long, hard look at the article to make sure that you’re not making mistakes you’ll regret down the road.,/p>

One of the most important lessons from the article is that if someone else has been paying the bills all your life, you may not even know what reasonable expenses are. You may have shopped for clothing, but do you know what rents cost in the city where you live (or plan to live)? Do you know how much to budget for utilities? (Do you even know what utilities you will need? And if any of them will be included in your rent?) Do you know how to shop for groceries: how to choose a supermarket, how to choose healthy but reasonably priced food, how to choose among different brands? You need to make sure you know how to cover the basic necessities before you start to splurge on things you want.

Another important point is that you need to save some of your money. Americans are notorious for not planning for the future. A huge percentage of Americans over the age of 60 do not have adequate savings for retirement, and it’s very easy for people in their 20s to think that they have plenty of time to worry about that later in life. But you don’t. Later in life you’re likely to get married, have children, buy a house, move multiple times, put kids through college, and/or need more medical care, so it’s actually true that when you’re just starting out, you may be in a better position to save then you will be later. Sure, you have lots of “start up” expenses—furniture, a car, perhaps even a new wardrobe appropriate to your job, as well as paying off college loans—but it’s also true that you may have more control over your spending now than you will later. So if you start the habit of saving (financial planners recommend saving 20% of your net salary), it will be easier to continue saving so that when those big expenses do come along, you won’t have to take out as many loans.

Keep in mind that small things add up. If you go out to lunch every day, you could drop anywhere from $10 to $20 (or even more, but probably not less) each day, which adds up to $2500 to $5000! Spending a few minutes packing a sandwich and piece of fruit would cost considerably less and allow you to enjoy the occasional lunch out even more.

The bottom line of this article is that you need to think about how you’re spending your money: don’t spend it on things you won’t really use, don’t spend it on things you don’t need, don’t spend it without really thinking about what you’re doing! If you can create a budget and live by it, that’s great. Not everyone is that disciplined, but at least try to spend mindfully.

One system that works for many people is to calculate how much you take home per hour of work, and then think of anything you want to buy in terms of how many hours you would need to work to pay for it. So is that new shirt really worth five hours of your time? Or can you find something that will only cost the equivalent of one hour of work?