How to budget once you get your first job

Making the transition from student to working professional can be a big adjustment, especially when it comes to your finances. If you're not used to having a regular paycheck, it can be easy to overspend on unnecessary items. That's why as a first-time employee, you need to learn how to budget the salary you earn from your first job.

Why budgeting is important

Budgeting is important for anyone who wants to manage their finances effectively, but it's especially crucial for those who are just starting out in the workforce. When you're just getting started, it's easy to get caught up in the excitement of earning your own paycheck and spending more than you can afford.

Having a budget can help you avoid overspending and getting into debt. It also allows you to set aside money for important expenses, such as saving for retirement, a down payment for a new home, or a potential investment you can get into.

How to budget your first salary

There are a number of different ways to approach budgeting, but the most important thing is to find a system that works for you. There are many budgeting apps and programs available, or you can simply create a spreadsheet to track your income and expenses.

Start by calculating your monthly income after taxes. Then, list out all of your fixed expenses, such as rent, utilities, and loan payments. Next, estimate your variable costs, such as food, transportation, and entertainment. Finally, set aside money for savings and investments.

Once you have a good idea of your monthly expenses, you can start making adjustments to ensure that your spending aligns with your goals. For example, if you want to save up for a down payment on a house, you may need to cut back on your entertainment expenses.

Don’t forget to track your actual expenses once you have a budget in place to see if your budget is working for you.

Budgeting your first salary doesn't have to be complicated or time-consuming. By taking the time to create a budget, you can ensure that you're making the most of your income and avoid financial problems down the road.

Things to include in your budget when you get your first job

Expenses

Expenses refer to the things you and your family need to spend for in your day-to-day life.

• Rent
  
• Transportation
  
• Food
  
• Insurance (if you have private insurance)
  
• Utilities
  
• Entertainment (this includes going to the cinemas, your subscription plans, etc.)
  
• Clothes
  
• Debt payments (if you have any debt)
  

Savings

Aim to put away 20% of your salary each month towards savings or an emergency fund.

Income

Your income is what you use to cover your expenses and should be at the top of your budget. You may have more than one source of income, such as a full-time job, part-time job, investments, or a side hustle.

Things to consider when budgeting your first paycheck

When you're creating a budget, there are a few things to keep in mind.

1. Your income may fluctuate from month to month, so be sure to budget for both your regular expenses and unexpected costs.
   
2. Don't forget to include money for savings and investments in your budget.
   
3. Be realistic about your spending. It's okay to allow yourself some room to spend on fun things but be sure not to overdo it.
   
4. Stick to your budget as much as possible, but don't be too hard on yourself if you occasionally need to veer off course.
   
5. Review your budget every quarter and after you get a salary increase to see what works and what needs to be adjusted.
   

Budgeting methods to try

There are a number of different budgeting methods you can try, and the best one for you depends on your personal finances and spending habits. We’ve listed the most common budgeting methods below as well as how you can use them.

The envelope method

With this method, you allocate a certain amount of cash to each category of expenses in your budget. For example, you put PHP 2,500 in an envelope labeled "Commute Budget" to cover your monthly transportation costs. Once the money in the envelope is gone, you can't spend any more in that category until the next month.

The 50-30-20 method

Under this method, you divide your after-tax income into three categories: needs (50%), wants (30%), and savings/debts (20%). Your needs include essential expenses, such as housing and food. Your wants include non-essential purchases, such as entertainment and dining out. And your savings/debts category includes money for things like retirement savings and paying off debt.

The zero-based budget

With a zero-based budget, your goal is to ensure that your income minus your expenses equals zero. Let’s say you earn PHP 40,000 a month. Using the zero-based budget, the entire PHP 40,000 will be allocated each month towards bills, savings, and investments. This means that you would need to find ways to cut back on your spending in order to free up money for savings or debt repayment.

Budgeting tips for success

Once you've decided on a budgeting method, there are a few things you can do to help ensure that you stick to your budget.

• Track your spending - This helps you see where you may be overspending and identify areas where you can cut back.

• Set up a system for bills and payments - This includes setting up automatic payments or setting aside money each month to cover your expenses.

• Create a buffer for unexpected costs - This could be an emergency fund, or a few extra pesos added to your budget each month.

• Find ways to save money - This could include using vouchers when shopping online, negotiating bills, or switching to a cheaper cell phone plan.

By following these budgeting tips for your first salary, you can make sure that you're on track to reach your financial goals.

Set up a Metrobank Savings Account where you can store the savings from your salary. Head to the nearest branch to begin.