Advice for building a budget for the first time

Question: Your current monthly expenses total $3,927, including: Housing (rent + utilities): $1,350; Household toiletries: $25; Personal toiletries: $100; Gym: $75; Groceries: $300; Eating out: $200; Family support: $500; Renter’s insurance: $15; Healthcare: $60; Transit pass: $80; 401(k): $334; Roth IRA: $583; HSA: $305

You want to ensure you manage your finances effectively while living alone in a city for the first time.

Answer:

Congratulations on your new job and move to Boston! It's great that you're being proactive about budgeting. Your current plan looks solid, but let's fine-tune it to ensure you're setting yourself up for financial success.

Here's my tailored advice:

  1. Emergency Fund: Allocate $500/month to build a 3-6 month emergency fund. This should be your top priority to avoid living paycheck to paycheck.

  2. Discretionary Spending: Add a $200/month category for entertainment, hobbies, and personal development.

  3. Clothing/Personal Care: Consider adding $100/month for clothing and haircuts.

  4. Transportation: Factor in occasional Uber/Lyft rides or car rentals. Budget $100/month.

  5. Gifts/Miscellaneous: Set aside $50/month for gifts, subscriptions, or unexpected expenses.

Revised Budget:

Recommendations:

  1. Increase your 401(k) contribution to 10% ($668/month) to maximize tax benefits and employer match.

  2. Open a high-yield savings account for your emergency fund and extra savings.

  3. Review and adjust your budget quarterly.

  4. Track expenses using apps like Mint or YNAB to ensure you're sticking to your plan.

Remember, your first budget is a starting point. Be flexible and adjust as you learn more about your spending habits in Boston.