Budgeting tips to build better spending habits after college 

 From flat-screen TVs to a new designer bag, twenty-somethings can sometimes have a got-to-have-it attitude. It transitions into our work ethic and motivates our personal lives, but what happens when it starts to hurt our wallets? Many members of Generation Y are facing student loan debt, new expenses, and the challenge of managing everyday spending. And yet it’s still tempting to purchase the newest gadget or keep up with trends. Even with a good salary right out of college, there are benefits to restricting spending and focusing on paying down debt and saving for the essentials. Here are some budgeting tips and things to avoid spending too much on as you cultivate positive spending habits for the future.

Create a budget

An often heard budgeting tip is to live within your means. When you get a new job, the first thing to do is create a budget to determine how much you need to put aside for set expenses like insurance and loan payments. Then you can determine how much you can allocate for rent, groceries, utility bills, clothing and discretionary spending. If you can stick to your budget, you’ll be able to set aside funds for an emergency, retirement, dining out, gifts and luxury items.

Open personal savings accounts designated for each specific goal – one for emergency funds with enough to cover your expenses for at least three months, a savings account with a higher interest rate (like an IRA) for retirement, and one set aside for discretionary spending. Then, rely as much as possible on withdrawals from this last account, rather than credit cards when making non-essential purchases.

Five things to avoid spending a lot of money on in your 20s

Even with a personal savings account designated for discretionary spending, it’s important to examine your purchases and determine what you need now, what can wait for a little while, and what you can put off until your major bills are paid in full. Consider adjusting your spending around these five items to save a little more.

1. Dining out: From food trucks to fine dining, it can be easy to spend a lot of money on food in your twenties (especially if you’re not a culinary savant). Dining out for lunch and dinner is an easy way to go through a lot of cash without realizing it. But that doesn’t mean you can’t enjoy a good meal with friends or your significant other. Just work the expense for one to two meals a week into your budget and stick to it. Then, look for other fun ways to have meals with friends like potlucks or taco night.
2. Name brands: We love our brands, we’re loyal to them, and most of the time they love us back. But sometimes they’re not so nice to our wallets. Try to curb your spending on name brand items in favor of the store brand whenever you can. Consider shopping at thrift stores, outlets, or more affordable stores to save money on clothes. Eliminating name brands from your everyday shopping means you can save enough for the luxury items you want later.
3. Luxury and new technology: According to an American Express report in 2011, this age group increased their spending on luxury and fashion by 33% from 2010. Whether it’s a designer watch or the latest smartphone iteration, we want to stay on trend and that can make it hard to stay on budget. You don’t have to sacrifice luxury altogether, you just need to be smart about it. Have your emergency fund established first, and look for discount deals. It may be tough being a little behind the times, but if you can hold out for free updates or until what you have wears out, you’ll be surprised by what you can save.
4. Travel luxuries: From your everyday commute to work to visiting friends, family or Europe, there are little ways you can save on travel that will save you big in the long run. Consider a bike commute to work. It’s easier on Mother Nature, and you’ll get fit, fast. If you buy a car, look for something with manageable monthly payments, a good resale value and shop around for the best insurance rates. Going to a wedding with friends? Share travel and hotel costs by carpooling and splitting a room, or better yet, stay with other friends. When you fly, book early and avoid spending on drinks and food in the airport if you can help it. Finally, see if the bus or train fare is cheap enough to make a slightly longer trip worthwhile.
5. Rent: One of the largest monthly expenses you’ll face as a twenty-something is your rent. You can’t avoid spending money on it, but you can reduce how much you spend and set aside savings to one day buy a home. Whether through roommates, location, or amenities, there are many ways to cut down the cost of your rental.

Create positive spending habits with a budget and personal savings account

When you’re young, a few splurges here and there are fine, but it’s important to consider the long-term consequence of spending the money, and to take the time to save for something. With a budget and a personal savings account you can plan for more discretionary purchases while taking care of your everyday expenses. You may even want to deposit some of your funds in a money market  or CD to avoid the temptation to withdraw early and earn more with the higher interest rates. Plus it will help you develop good spending habits for the future.