Kiplinger.com, September 5th, 2007
Liz
Ruiz, a reporter
with
Columbia, S.C
, recently contacted me to ask about spending guidelines for new college grads. I was happy to oblige. And
Liz
herself turns out to be a textbook case for post-college budgeting.
The State
newspaper in
A 2006 graduate of the University of South Carolina,
Liz
is laboring under more than $5,000 in credit-card debt. To drop the weight, she put herself on a monthlong extreme budget -- no spending for clothes or entertainment and only $5 a day for food. That's a great gimmick as shock therapy, but it's likely to end up like all starvation diets -- in a consumption binge.
By her own account,
Liz
flashes her debit card so often that even her online bank account can't always keep up. (I suggested that she subtract each transaction in her checkbook at the time of purchase so she doesn't lose track.)
Still,
Liz
is doing a number of things right:
Liz
tracked her expenses and knew exactly where she was hemorrhaging cash -- shopping for clothes and home goods, on which she had spent more than Know where the money goes.
$600 in one month alone.
Liz
transferred Consider a balance transfer and prioritize.
$3,600 of her credit-card debt from a card charging 11% to one charging a fixed rate of 3.9% until 2011. Her top priority is to pay $300 a month toward the $1,800 she owes on another card -- a Visa that charges 8.9% -- but this month she'll pay off the measly $200 balance on her Best Buy card (a good idea so she'll feel as if she's making progress).
Liz
, "Seeing bigger numbers in my bank account is almost better than seeing new clothes in my closet."Don't give up on saving. Meanwhile, she's also putting money toward saving (another good idea) with an automatic deposit of $50 per month. Says
Liz
started her budgeting crusade when she realized how much it would cost just to apply for grad school: Keep yourself accountable.
$150 for the exam and $50 to $100 per application. She says that writing about her experiences in her online blog keeps her accountable. You don't have to share your struggles with the world to get outside encouragement. Simply writing down your goals, or discussing them with a friend, will keep you on task.
And now for those spending guidelines, expressed as a percentage of take-home pay:
-
30% Housing
-
15% Food (both at home and away)
-
10% Utilities and other housing expenditures
-
10% Transportation
-
10% Debt repayment
-
10% Saving
-
5% Clothing
-
5% Entertainment
-
5% Miscellaneous personal expenses.
You can certainly adjust these figures to reflect your actual expenses, but they're a good starting point. To see how this budget might work in real life, see Cost-of-Living Reality Check.
