Tuesday, July 17, 2007

Your First Budget

It had been 2 weeks since I joined Corporate America and the day had come where I earned my first real Paycheck. I made it; all the hard work at school had transformed me from being the ‘almost geeky’ girl to the richest woman of the day (or so I thought).

Slow down cowgirl, what about the bills? You know, the ones included in your independence package that eat up most of your brand new Paycheck. Well, no one really tells you about the bills, let alone how to set up a BUDGET!

I was watching the Tyra Banks Show (I love you Tyra!) where Lynette Khalfani, a personal finance expert, listed the maximum % that needs to be set aside for each expense type.

I added a third column to Lynette’s table to show what it means for a Biz Girl who earns (say) $2500/month:

Notice that this budget does not even include credit card debt or school loans.

As you can see, partying in New York can be very limited on a $125/month budget. Of course, you have a choice: ignore the budget and live beyond your means (which is a very common practice) or focus in what is necessary to ensure a wealthy, debt-free future. Biz Girls follow the latter.

As a rule, you will have to save 3 to 6 months worth of living expenses as a permanent savings cushion. Following the example above, our Biz Girl needs $2000 to live (if you exclude savings, clothing and entertainment) which means her permanent savings cushion needs to be between $6000 and $12000. This is to ensure that you are covered during the time you are looking for another job if anything happens to your current one (on average it takes 3-6 months to get a new job).

Please don’t let this entry discourage you, if you feel scared, don’t worry, this is a normal feeling and it means that you understand the importance of this reality check. My next blog will list tips on How to Survive on a Budget that will help you maintain and enjoy your budget!

Check out the links below:
SoYouWanna Set Up a Living Budget?
How Much Savings Do I Need?

The Biz Girl

1 comment:

Anonymous said...

Ah finally something that guys can look forward to also. Nice work! :)
- Navin