Moving To The City For Your First Job? Here’s A Crash Course In Early 20s Budgeting

So, your first grown-up job is locked down, your first apartment in your dream city is leased, and your first paycheck deposited. Welcome to your main character era!

But at the risk of sounding like your parents, all the expenses that come with city living stack up fast. And in this economy, few of us can afford to be totally carefree. In fact, over half of Gen Zers (51%) say they don’t earn enough to live the life they truly want, citing the high cost of living as one of their biggest financial barriers.

And sure, you might not have an influencer’s salary, but that doesn’t mean you can’t enjoy yourself. It just means you’ll need to create a budget that helps you afford all those fun, young city activities like espresso martini brunches and viral workout classes.

Luckily, a little bit of math goes a long way. If you’re staring down the barrel of a big city move and feeling financially overwhelmed, don’t worry! There are plenty of online resources breaking down the basics of building a strong monetary foundation. Follow this step-by-step guide to building your first budget, and you’ll be racking up major financial aura points in no time.

Step 1: Assess Your Monthly Income

Friendly reminder: your gross salary (aka, how much you’re earning before taxes and withholdings are taken out) looks one way, but your take-home pay will be less than that. Just in case you get “gross” and “net” mixed up like the rest of us mortals, the latter is the number that ends up in your bank account. To calculate that number, figure out what your taxes, insurance premiums, and any other contributions (like FSA or retirement) might amount to. Subtract that number from your gross income, and that’s your take-home pay. Divide your take-home pay by 12 to determine how much money you’ll have to allocate towards monthly expenses.

Step 2: Get A Sense Of Your Housing Costs

For most people, rent or a mortgage is their largest monthly expense... and those costs are higher than ever these days. According to a survey on the state of Gen Z’s financial health, one in four Gen Z respondents consider housing and/or rent expenses a top barrier to financial success. Meanwhile, analysts recommend you spend no more than 28% of your income on your mortgage or rent, which you can calculate with this free tool.

And sure, it might be tempting to splurge on that dream apartment with crown moldings and vintage kitchen tile. But you’ll set yourself up for a better financial future by being frugal when it comes to the roof over your head.

Step 3: Rank Your Expenses As Needs, Wants, & Future Planning

With your biggest monthly expense accounted for, you’re ready to figure out where the rest of your money will go. Some of your expenses are needs (think: groceries, car insurance, internet) and others are “wants” (like travel funds and fancy coffees). Many people use the 50/30/20 rule for after-tax income, corresponding to 50% for “needs” (which includes rent), 30% for “wants,” and 20% for savings.

Keep in mind that “needs” in a city are likely to cost more than they do anywhere else, so it might be best to adjust the 50/30/20 rule to fit your reality. But as a starting point, it’s a good framework to get yourself ready for financial independence.

Step 4: Set Long-Term & Short-Term Savings Goals

The future might feel distant, but establishing both short and long-term savings goals is something your tomorrow self will thank you for. A short-term savings goal might be saving for your next vacation, a new car, or building an emergency fund, while a long-term savings goal might be geared towards retirement or a down payment on a house. If you want to create a realistic plan for reaching these goals but have no idea where to start, there are plenty of online resources to take some of the guess work out of the equation.

Step 5: Stick To Your Guns

FOMO and financial peer pressure are lurking around every corner at this time in your life, but getting comfortable with saying “no” to pricey dinners or impromptu weekend getaways is key to avoiding overspending. Spending money is often linked to our emotional state, so it’s important to check in with yourself before making both big and small purchases. Even if it seems like all the girlies are out enjoying happy hour every night, staying home and enjoying your rent, streaming a new show, and learning to take care of yourself can be equally rewarding.

Step 6: Set A Quarterly Check-In For Yourself

Once you’ve established your budget, you’re done! Lol, jk... Budgeting is an ongoing process.

That’s why it’s smart to schedule check-ins with yourself every three months. Use this time to take inventory of how your budget supports your lifestyle, and how you’re tracking toward your savings goals. Don’t get discouraged if you’re not perfect. The more you practice budgeting, the better you’ll get. Lastly, remember that a budget will evolve over time as you get a raise, change jobs, or find a partner. It’s OK to adjust and edit along the way.

Taking steps to financial independence? Check out Bank of America's Better Money Habits site for a whole host of resources to help you get there.