First Real Job...No Idea How to Save

[Whitechapel]

Hello all,

I finally graduated college back in December with a degree in computer engineering. I finally landed my first huge job, I'm making a little under 40k pre-tax. I contribute to a 401k (right now I'm contributing 4% I think, and the company I work for matches up to 4%) and pay for good health insurance. My only problem is I have NO idea how to save. Sadly, I'm 27. But this needs to be fixed and immediately. I am single, and have no girlfriend or kids. I'm pretty much on my own for the moment, but I'd like to get prepared for when I finally do meet the woman of my dreams. My mom always jokes that I need to hurry up and get married so I can have a woman take care of my finances for me since I'm not capable of doing it on my own, haha.

So I need to know who I can talk to about how to save money properly. My first couple paychecks I've spent paying everyone back almost who I borrowed money from when I was not working. But now it's coming to the point where almost everyone is payed back, and I'm still living paycheck to paycheck, around 1,000 dollars each check with the exception of the first one.

What can I do to learn how to save? Are there any financial planners I should talk to? It's obvious I don't have any clue how to save properly for now and the future. Either way it is something I need to begin doing, I just don't know how. And believe it or not, my not saving stresses me out beyond belief. I'm moving into an apartment in a couple weeks and have nothing saved for it! I have the EasyMoney app for my money to try and help me manage my finances better too, but all it seems to be is a good tool to calculate how much money I currently have. And meanwhile I just keep spending, spending, spending.

As far as debt goes, I have student loans (around 20k), around 2000 dollars worth of various credit debt (I'm on a payment plan to get back on track with these), and random doctor bills which vary in price. My apartment rent is $635 a month, excluding utilities (cable and internet, gas, electric, water are not included). Much of the money I spend goes to things like beer, the bar, and food. There is one more item I buy too but I would rather not say, it runs me around 160 bucks every two weeks or so. But lately I've lost a lot of cash due to paying people back. So while that is good, it's been leaving me a little short on cash. And now my car is making noises when I break, so I should be saving and getting prepared to get that fixed. Also I've been commuting around 50 miles to work Monday through Friday, so gas has been eating away at my paychecks. This will change to be a 20 minute commute once I move, plus I will be carpooling with a coworker of mine every other week, saving even more gas.

As far as budgeting methods go, I have tried writing down every expense to keep a running total. But that's the extent of it, I did nothing more than have a list of expenses. I've tried talking with friends about saving but we never came up with a solid plan or anything on how to save. Otherwise I just use my phone app to let me know how much money I have so I know how much to spend. If I want it badly enough, I'll just say screw it and go for it. It's that bad!

Please help me, I can't believe I've gone this far in life without being able to save. It's horrible, but that's why I'm here for help.

[kork13]

Welcome, and don't fret. You're still young, and all that matters is that you're starting to save now.

There are 2 sides to being able to successfully save -- decreasing expenses, and increasing savings.

For the former, the first thing I'd suggest is keeping a notebook, excel sheet, or something similar that you can track every penny you spend. You can look at where you're spending your money, and figure out where you can trim your expenses. A lot of times, that might be grocery costs, eating out, too-big cell phone or cable contracts, or just generally overspending whenever you're out shopping.

For the latter, the easiest and most consistent method is to set up automatic transfers from your paycheck or checking account to a specified savings account as soon as you get paid. Some people find it helps to physically separate the savings account by putting it at a different bank, like using an online savings account from ING, Ally, or others. But by automatically having the money go to that savings account, you don't miss it quite as much, because you never really see it. All the while, it just sits there and builds.

[Whitechapel]

For the former, the first thing I'd suggest is keeping a notebook, excel sheet, or something similar that you can track every penny you spend. You can look at where you're spending your money, and figure out where you can trim your expenses. A lot of times, that might be grocery costs, eating out, too-big cell phone or cable contracts, or just generally overspending whenever you're out shopping.

I actually use a Droid app called EasyMoney that lets me track all of that. I'm not using the app properly though, I'm labeling every expense as "Other" and marking it as cleared since it's coming right out of my bank account.

For the latter, the easiest and most consistent method is to set up automatic transfers from your paycheck or checking account to a specified savings account as soon as you get paid. Some people find it helps to physically separate the savings account by putting it at a different bank, like using an online savings account from ING, Ally, or others. But by automatically having the money go to that savings account, you don't miss it quite as much, because you never really see it. All the while, it just sits there and builds.

I'm actually checking with Fifth Third at the moment, and they have a savings option that forces you to go into the store to make savings transfers. I haven't put a dime into my savings though, every paycheck I get I go into a buying frenzy, paying people back, buying a bunch of beer and smokes, gas. Literally by the end of payday Friday my check is at least half gone. Although the good news is I have been including all the little things I need to pay for, like paying someone back. So it's not ALL going to waste. Not to mention I've been paying bi-monthly payments to credit cards it seems to get me back on track with them. But the one credit card I have is so bad that once I pay it all off I can no longer use it.



How much should I be setting aside for each paycheck in my savings? Like I said, I'm pulling in 1k every two weeks.

What can I start doing this upcoming paycheck (the 11th) to fix my bad spending habits? I need to pay around 500 (I haven't saved anything towards the cost of moving yet ) dollars to move into my apartment on the 18th. I have 300 dollars in my bank account to last me the rest of this week and up to next Friday. This needs to include gas and food. And speaking of food, I should mention I eat out A LOT. For lunch I like to go to McDonalds...it's cheap. I spend 2-3 bucks on lunch. At night I might spend a little more if I go somewhere else. So I'm spending twice a day at least on food alone.

I should also mention I work a part time job that pays every week. I make around 50 bucks on average a week there. Once I move I plan on quitting though, so I wont have that little extra supplemental income. It's been nice for gas, but that's been about it. I would quit it, but honestly I need the money so bad that I'm willing to put up with working a full time job and a part time one.

[kork13]

I actually use a Droid app called EasyMoney that lets me track all of that. I'm not using the app properly though, I'm labeling every expense as "Other" and marking it as cleared since it's coming right out of my bank account.

That's perfect. Try to start actually using as it's meant to be used (setting up and using categories), and it'll identify where your money's going, and then help you start getting a handle on your spending.

What can I start doing this upcoming paycheck (the 11th) to fix my bad spending habits?

every paycheck I get I go into a buying frenzy ...... buying a bunch of beer and smokes ...... I eat out A LOT. For lunch I like to go to McDonalds...it's cheap. I spend 2-3 bucks on lunch. At night I might spend a little more if I go somewhere else. So I'm spending twice a day at least on food alone.

Here's a few things that could be addressed pretty quickly:
1) Ditch the beer, switch to water. Water is cheap, actually promotes health, and you'll probably find that you'll lose a few pounds within even just a few weeks.
2) Do everything you can to quit smoking. I know how terribly hard it can be to quit, but doing so will be tremendously beneficial for your health and to your finances.
3) Bring lunches with you to work, and cook dinners at home as often as you can. When you're spending $10/day on eating out, you're not going to get ahead. Here's a thought... Apple - $.50; yogurt - $.50; turkey/cheese sandwich - $1.00; baby carrots - $.20; almonds - $.30; .5 liter of water - essentially free. For the same $2-$3, you've got a much better lunch for yourself. Or, make a crock of stew or chili, add some rice, and you've got lunches (or dinners) for a week for about $6-$8. There are lots of ideas out there.

How much should I be setting aside for each paycheck in my savings?

Try starting with just $50/mo. It doesn't seem like much, but it'll build over time. As you get used to that $50 not being there to spend, try to up it to $100/mo. Then $200/mo. That's how you get into the habit of saving.

[BMEPhDinCO]

Honestly, while you've gotten good advice, it sounds like you are still making excuses.

Give us a list of your expenses.

Track your expenses (For real) for 1 week.

Decide what is more important to you - going out and having fun, or saving up for a house/wedding/retirement/etc that grownups need to worry about.

I'm also 27. I have a house with a low mortgage, I have retirement savings, I have a paid for car, I'm married with a paid for wedding, I have savings for my schooling (Grad school), I have savings for "funny noises from the car". I make less than you do.

It's all about choices and you need to figure out what choices you want to make now.

Here's what I'm hearing from you:

$2000 a month take home pay

$635 rent
$320 personal thing
$50 CC (my guess at your minimum)
$250 student loans (my guess)
$150 in gas (my guess)

=$595 per month left for groceries, going out, utilities, savings, etc

Groceries for 1 should be around $30 a week for $120 - let's give you $145 for a little more
Utilities vary widely - cell, cable, internet, wstreg = ~$300
Save at least 10% (plus that 4%) = $200
Going out: $50 a month

However, that = $695 - $100 more than you have!!

You should get rid of whatever is costing you $320 a month - then up the savings to 15% ($300 a month - $100 retirement, $200 into an online bank). That will also free up more for going out and having fun.

If you really can't get rid of whatever the "thing" is, then you'll have to cut back on savings to $100 a month - which won't get you $500 in two weeks.

See how the balance thing works?

[Whitechapel]

You need to create a budget and stick to it. Since you said that you have tracked your expenses, a budget should be pretty easy.

Here is an example of a budget that you could use:

You say you are making just under $40k per year. If I take $39k and divide it by 12, I get $3250 for your monthly gross income. If I assume you are paying roughly 25% in taxes and other deductions, I get $2437 for a net monthly income. Subtract 4635 for what you say your monthly rent will be and you are down to $1802. Utilities should not run more than $300 per month, so by using that figure, you are down to $1502. Using $150 for groceries (which is roughly $37 per week, very doable for a single person) and you are now down to $1352. you said you travel 50 miles to work, I am going to assume that it is 50 miles 1 way, 100 miles per day which is 500 per week. Getting 25 mpg means you are using 20 gallons of gas for work. Up that to 30 gallons per week at $4 per gallon and you now have $120 for gas. You now have $1152 to work with. Give yourself $150 for "blow" money and you are down to $1002. You should be giving to a church or charity so maybe give $150. You now have $852. Have a direct deposit into a savings account for $150 per month to build an emergency fund. You now have $702 to work with. $320 for the expense that you do not want to mention and that leaves $382 for you to throw at your debt. Get all of your debt paid off and that will free up the $382 to blow, invest, save and give to charities.

The key is that you are going to have to have the discipline to stick to a budget. That may mean less beer, food and/or partying. You can do this, just stay focused and realize that it will pay off in the long run. At the age of 27, if you have the discipline to follow a budget and save, you can retire as a multimillionaire!

That is awesome and puts it into perspective. Once I get off work tonight I will sight down and figure out what is going where, and I'll post what I find out.

1) Ditch the beer, switch to water. Water is cheap, actually promotes health, and you'll probably find that you'll lose a few pounds within even just a few weeks.

I wish I could, but I can't. I'm not an alcoholics by any means, but me and my roommate are quite the beer snobs. We like to have a good hand on beer. So while I'm not willing to give it up, I can cut back. I did just make a return from Cleveland with a bunch of cases of Yuengling, so as long as we're not going out, I'm good on beer. And usually I'll go out to drink randomly and I'll have a few beers. Like this weekend, we did some heavy drinking before The Rum Diary (my favorite author, Hunter S. Thompson!). It's not a regular occurance, but it does happen from time to time.

2) Do everything you can to quit smoking. I know how terribly hard it can be to quit, but doing so will be tremendously beneficial for your health and to your finances.

Already ahead of you. I've only been smoking MONTHS, but I am working on quitting. I smoked the last of my ultra lights a bit ago, and I do not plan on buying another pack. I proved to myself I still smoke as long as I have them on me.

3) Bring lunches with you to work, and cook dinners at home as often as you can. When you're spending $10/day on eating out, you're not going to get ahead. Here's a thought... Apple - $.50; yogurt - $.50; turkey/cheese sandwich - $1.00; baby carrots - $.20; almonds - $.30; .5 liter of water - essentially free. For the same $2-$3, you've got a much better lunch for yourself. Or, make a crock of stew or chili, add some rice, and you've got lunches (or dinners) for a week for about $6-$8. There are lots of ideas out there.

Will definitely keep this in mind. I do need to lose weight, I'm about 20 pounds too heavy for my liking. And I do eat A LOT of fast food, I'm surprised I haven't blown up my weight.

Try starting with just $50/mo. It doesn't seem like much, but it'll build over time. As you get used to that $50 not being there to spend, try to up it to $100/mo. Then $200/mo. That's how you get into the habit of saving.

Will keep it in mind. I'm just in the habits of a horrible spender, I need to break things down more clearly.

[Whitechapel]

Honestly, while you've gotten good advice, it sounds like you are still making excuses.

I am still making excuses. I'm that bad of a spender. Like I said, I'll do my list of expenses tonight and post it once I have it all up and running.

[caderousse]

I would advise you read a good personal finance book like "I will teach you to be rich" or "Your money or your life". They all stress similar things but the biggest thing to me is "Out of sight, out of mind".

Set up some sort of system to automatically deduct money, even if its just 50 dollars/paycheck , and put it away. Over time it really does add up.

Also, some of the estimates above are insane. $37/week on groceries?

3 meals * 7 days = $1.76 per meal

Yeah right.

[disneysteve]

I wish I could, but I can't.

You can. You just choose not to. Those are two entirely different things.

Until you get NEEDS vs. WANTS clear in your mind, you will continue to struggle.

Food, water, basic housing, transportation, medical care are needs.

Beer, cable TV, dining out, smart phone with bells and whistles are all wants.

Try this. Once you have all of your spending listed, divide that list into Wants and Needs. Your goal should be 50% for needs, 30% for wants and 20% for savings. If you aren't there, start slashing spending from the wants column until you are there. You may also need to make cuts from the needs column. Just because something isn't a need doesn't mean you might not be overspending on it. For example, auto insurance is a need but shop around and make sure you have the best rate you can.

[riverwed070707]

"Also, some of the estimates above are insane. $37/week on groceries?"

I just went to Meijer with my wife the other night. Banquet had TV dinners on sale 5 for $5.00. You can also buy a can of soup for around $1.50. For those that know how to cook, they can find pasta and other items cheaply. You can't eat steak for $37 per week, but you can have an adequate amount to eat.

Agreed. We cook a lot in our house and everything is budgeted. I spend just under $70/week on groceries for a family of 3. I aim to spend no more than $5 for every dinner and I make more than we can eat. Leftovers are used for DH and I's lunches the next day so essentially $0 cost if you're counting the whole $5 toward the previous night's dinner. Comes out to be about $1/serving if we get 3 dinners and 2 lunches from it. DH also has tuna for lunch often which costs all of like $.60 for the sandwich with tuna, cheese and bread.

Breakfast we eat eggs, yogurt, toast, fruit -- none of that costs $1.50/serving! We drink milk and water (no soda, juice, etc) and snacks are usually chips and (homemade!) salsa, crackers, nuts, raisins, cheese or something similar.

I buy meat in bulk when it's on sale. Few weeks back ground beef went on sale for $1.88/lb for 80/20 and I bought about 20 lbs. That's huge savings compared to the normal price of $3.50+/lb. I buy whole chickens instead of breasts. We have meatless meals a couple nights a week. There are lots of ways to keep your grocery bill manageable.

[Whitechapel]

You can. You just choose not to. Those are two entirely different things.

I agree. Beer is one of those things I will always want to have money for as long as I'm working. Whether it be bringing some home or going out for a pop or two after work, I want to have money available for it. It's one of the things I do and try to plan for.

[caderousse]

"Also, some of the estimates above are insane. $37/week on groceries?"

I just went to Meijer with my wife the other night. Banquet had TV dinners on sale 5 for $5.00. You can also buy a can of soup for around $1.50. For those that know how to cook, they can find pasta and other items cheaply. You can't eat steak for $37 per week, but you can have an adequate amount to eat.

Hmmmm, let's see. I can save a few bucks eating Banquet TV Dinners......OR I could live past the age of 50. I'll take what's behind door #2 Bob

I believe in saving money but what good is money when you don't have your health?

[disneysteve]

I agree. Beer is one of those things I will always want to have money for as long as I'm working. Whether it be bringing some home or going out for a pop or two after work, I want to have money available for it. It's one of the things I do and try to plan for.

And that is perfectly fine. We all have different priorities. So when you list your wants and needs and need to keep your wants to 30% of income, you'll put beer high on the list and it won't be one of the things you'll cut out to get the budget in line. I have no problem with that at all. What I was concerned about was the attitude that was coming across - I can't stop buying beer. Sure you can. That's much different than - I don't want to stop buying beer and I'm willing to cut out other things in order to continue to afford the beer.

What you can't do, what none of us can do, is operate at a deficit. The outgo needs to be less than the income.

[elessar78]

Sounds like me when I first graduated college. My best friend and I couldn't accept that the "dream" was over so we spent a good bit of that first year out of college drinking beers at the local bar. Let me just say, in no uncertain words: THAT LIFESTYLE IS AWFUL.

Bad for your wallet, bad for your health, bad for your physique, bad for your career.

My favorite personal story on how I started saving: I had an online bank deduct $5 from my paycheck automatically every week. Quickly, I realized I can live without that 5 bucks, so I doubled it. Realized I could live without that ten. I doubled it. In 12 months I was saving in the 3-figures. About a decade later I'm saving in the high 3 figures A WEEK (4-figures if you count my retirement).

The beauty of the online bank was that I couldn't access it immediately. It took 3 days to get the money back so it was not accessible for impulse purchases. Of course, keep a substantial amount on hand for emergencies, but you have to protect your money from yourself. Strange to say, but I think most people are their own worst enemy when it comes to saving.

[disneysteve]

My favorite personal story on how I started saving: I had an online bank deduct $5 from my paycheck automatically every week. Quickly, I realized I can live without that 5 bucks, so I doubled it. Realized I could live without that ten. I doubled it. In 12 months I was saving in the 3-figures. About a decade later I'm saving in the high 3 figures A WEEK (4-figures if you count my retirement).

You know, I'm 47 years old and basically still do this very same thing. About every 6 months, I bump up our savings rate by 1%. I keep bumping it up and if we really don't notice a difference, I bump it up another 1% 6 months after that. I'm now up to 23% savings and just in the past few months, I've noticed things being kind of tight, but we also had some unusual large expenses that came at the same time. I won't be going to 24% in January as a result but by the time July rolls around, if things have gotten back on track, I might.