A Guide to Budgeting for Recent Graduates


In Personal Finance StudentsLendKey

Graduating from college is a major milestone. Finally, you can expect to have no more classes, no more homework or tests, and no more all-nighters (hopefully)!

But with this newfound freedom comes a new series of responsibilities. For one, your student loans are looming over the horizon, and you’ll need to start budgeting for monthly payments. Additionally, many other aspects of your life could change anything from your housing situation to your career path. Will you be financially ready to start “adulting” like never before?

The key to managing your money after your days as a student is building a budget that ensures you cover all of your essential expenses, and that you some cash to have fun with too. Follow this guide to build a budget that helps keep you out of hot water and meet your financial goals.

New Responsibilities for Recent Graduates

Life comes at you fast, and when you graduate college it can sometimes leave you unprepared. Where do you go now? What is the next step? Should you take a year off and go back to school for a postgraduate degree, or should you start applying to your dream job now?

To start, you will need to familiarize yourself with some of your new financial responsibilities. This could mean you need to set up a tight budget to start paying off your student loans. This could also mean that you will need to move off campus or start applying for jobs within your field. Additionally, you should start reading up on some of the more technical parts of being an adult, including starting your 401k, filing taxes, and researching health care benefit packages (if you’re nearing the 26-years-old milestone that means your parents can’t cover you) for your job.

Here are some of the questions you can ask yourself to help you develop a better financial plan for your future, both near and long-term:

  • Career: Your first job after college will most likely not be in the field you studied. Many companies want to see hands-on experience on your resume before they will consider you for a position, and that experience has to start somewhere. Regardless, once you gain a full-time position with any company, you will want to look into their benefits packages — especially what they offer for a 401k. It might seem silly now, but saving up for retirement should be a top priority in your early to mid-twenties1. Every bit you save now has the potential to grow exponentially (because 401ks are invested), which is important for a financially secure retirement. Outside of a retirement plan, you might also need to research health plans (if you don’t already have insurance or will soon turn 26) and look for additional perks. Although your first year or so outside of college might be rough, be sure that you apply to companies that can help you grow your resume but also can provide excellent perks for you.
  • Housing: If you were living on campus throughout college, it may not be a surprise that you will soon need to find a new place to live. The rental market across the United States is a bit ludicrous in the current economy2, but that doesn’t mean you have to compromise on your budget. Unless you can find a great deal, consider renting a house with roommates, as it often can dramatically drop the cost of rent. Additionally (but rarely) in some areas of the nation it could be cheaper to buy a house rather than rent one. If this is the case, research your options and be sure that you can afford monthly mortgage payments (as well as any additional taxes or fees for owning property in your area).
  • Transportation: Purchasing a car might be a non-issue for some college grads, but if you were reliant on riding your bike to school or lived on campus, then transportation might be an additional concern once you graduate. Research your options — whether it’s public transit or purchasing your first ever car — and consider including transportation costs in your overall yearly budget.
  • Location: For some college graduate, college might be an opportunity to leave their hometown or travel abroad. But what happens when you finish your schooling? Do you need to move to a new town to find a job? Do you want to take a gap year to explore the world? Or should you stay in your college town and gain experience first? Whatever your choice may be, it could affect how you plan out your budget. Be conscious of how much it would cost to travel or move out of state.

It can be hard to be a young adult, and the professional world is not always welcoming to those that are fresh out of college with little hands-on experience. However, it’s important to remember that your college degree — no matter the area of concentration or level of education (two-year degrees all the way up to doctorates) — will always benefit your career in the long run.Studies have shown that college grads (across all racial groups) are better off in terms of employment and wage opportunity than those who only have a high school diploma. On average, college grads make almost twice as much as their GED-holding counterparts.3

So don’t become discouraged by the potential slow start you might have to your career. In the long run, those years in college will pay off. You just need to start budgeting immediately to reach that point in optimal financial shape.

Budgeting with Student Loans

One of your biggest financial hurdles coming out of college will be student loans. Depending on how much you borrowed and who your lender was, your monthly payments could start at $250 or more — which is a significant chunk of change and could take years to pay off fully. Luckily for many graduate students, most lenders allow a six month grace period once you graduate. This will give you the perfect amount of time to either start planning out your payments or figure out a refinancing option.

To start, utilize a student loan calculator (such as this one provided by StudentLoans.govto determine what your monthly payments would be. This will help you prepare your post-graduation budget, as well as give you a better idea of how consolidating or refinancing your student loans might work to your advantage. If budgeting in your monthly payments puts you in the red by the end of the month, then it might be in your best interest to review your options. Here are three main options available for graduated students:

  • Student Loan Consolidation: Most students will have more than one loan throughout their college education, which means figuring out interest rates, monthly payments, and loan postponement can be difficult. Sometimes the best option is to consolidate your loans with a lender so you only have one bill to worry about. Your interest rate from the previous loans will carry over into this new loan.
  • Student Loan Refinancing: Refinancing can allow you the freedom to choose your own terms for repayment on student loans. This includes a lower interest rate, which is why refinancing can sometimes work better for your budget than consolidation. To find out more about refinancing, download LendKey’s Ultimate Guide to Student Loan Refinancing.
  • Student Loan Postponement: Requesting a student loan postponement can be tricky, but if you are currently unemployed or experiencing financial difficulty, postponing your payments might be in your best interest. You can find out more about postponement (also known as forbearance) here.5

For federal student loan, also check out this chart for repayment options.

Unfortunately, student loan repayment is not something you can avoid. Figuring out how much you owe will help you structure the remainder of your monthly budget around your loans.

Build Your Budget

Pinning down all the details of your post-graduate life will help you better structure a budget that works for you. Student loans will be a big part of that budget, but there are other aspects to consider such as housing, car payments, savings, and a little bit of extra money for entertainment and personal purposes. So how can you build a budget that factors in all your expenses and helps you leave a little room for yourself?

A good place to start is with the 50/20/30 budget6 created by Senator Elizabeth Warren. This budget breaks down on a monthly basis how much you should spend on housing, bills, and how much you should be saving based on your monthly income. Here are the details:

  • 20 percent of your budget should go to meeting financial goals, such as paying off loans, credit cards, or making investments. This can be tricky to maintain when paying off student loans but is a good threshold to set for yourself moving forward towards financial stability.
  • 30 percent of your budget should go to flexible spending or saving money for yourself: whether that’s with travel expenses, house necessities, or other treats for yourself. When you’re first starting out, it might be hard to leave this much for yourself, but it’s a milestone worth achieving.
  • 50 percent of your budget should go towards your living expenses and essentials. This includes your monthly rent, bills, food expenses, and transportation costs.

To start, you will need to keep track of everything you’re spending money on and label them according to these three parameters: essentials, financial goals, and flexible spending. Once you can estimate the percentage of the money you spend in each category, consider different ways in which you can cut back. If you’re spending too much on essentials, then it might be worth it to switch up transportation or move into a more affordable house. If you’re spending too much on financial goals, then it might be worth it to consider refinancing your student loans. And if you’re spending too much on flexible spending, then it’s obvious you need to change up some of your spending habits.

The 50/20/30 budget isn’t so much a rule as a guide. It can help you build your way towards financial stability, and is a great template to follow for those that are a novice to budgeting. Plus, it’s flexible to your needs, meaning if you need to reorganize the budget you can (for example: 30 percent on essentials, 50 percent on financial goals, and 20 percent on flexible spending).

Graduating college can be an exciting time in your life, but it can also be stressful when you consider all the different responsibilities you now have. To avoid becoming overwhelmed, start early and plan out your monthly budget to help you better plan for your newfound freedom. The sooner you start planning, the better prepared you will be for your future as a new adult.


  1. http://www.calculator.net/401k-calculator.html
  2. https://www.forbes.com/sites/samanthasharf/2016/09/12/the-markets-where-the-cost-to-rent-a-home-is-rising-fastest/#de25d467b1fe
  3. http://money.cnn.com/infographic/economy/college-degree-earnings/index.html
  4. https://studentloans.gov/myDirectLoan/repaymentEstimator.action?_ga=2.93222685.1636002279.1512051212-1495972004.1512051212
  5. https://www.consumerfinance.gov/ask-cfpb/what-is-forbearance-en-631/
  6. https://www.forbes.com/sites/trulia/2016/07/11/new-to-budgeting-why-you-should-try-the-50-20-30-rule/#3ff51d5932e9