“Ask Brianna” is a Q&A column from NerdWallet for 20-somethings or anyone else starting out. I’m here to help you manage your money, find a job and pay off student loans — all the real-world stuff no one taught us how to do in college. Send your questions about postgrad life to [email protected]
This week’s question:
I don’t have a lot of spare money, but I still want to socialize and travel. How can I live within my means without becoming the annoying broke friend?
First, take a breath. You will not lose friends — real friends, at least — because you can’t swing a girls’ trip to New Orleans this year. You also might want to remember that appearances can be deceiving. Your buddies may go to happy hour three times a week, but that doesn’t mean they can afford to.
Take one measure, student loan debt, for example: About 7 in 10 graduates of public and nonprofit colleges left school with debt in 2015, according to The Institute for College Access & Success, at an average of $30,100 per student. You may feel alone and broke, but in reality, you’re in good company.
“The people that you think are having these great lives on Facebook and Instagram, they’ve probably got student loan debt,” says Ben Graney, an actor and writer who co-founded the Artists Financial Support Group in New York. “They’re probably feeling the same anxiety and the same fears,” he says — they’re just not showing it.
Instead of hiding away in shame or constantly complaining about your rock-bottom bank balance, use these strategies to budget — and socialize — with confidence and control.
First, make a basic budget
Whether you’re in grad school, stuck with massive student loans or living on an artist’s erratic income, the first step is to own where you stand financially. But to do so, you need insight. A budget helps you determine where your money is going and where you want it to go. Without one, you may have only a vague sense that you should limit your spending, using scary clues like a maxed-out credit card or late rent payments.
To create a basic budget, you don’t need to catalog all of your expenses or commit to using an expense-tracking app — unless you want to, of course.
“Budgeting is not about perfection. It’s about creating awareness,” says Matt Cosgriff, a certified financial planner at financial advisory firm Lifewise in Minneapolis.
Look at your bank account and write down your take-home pay from last month. Subtract your fixed monthly costs: rent, utilities, insurance, groceries, debt payments (including credit cards) and transportation. Aim to save 10% to 20% of any remaining amount for emergencies and retirement. The rest is for fun or other long-term goals.
If your fixed costs take up all, or nearly all, of your income, look for ways to free up cash. You can lower federal student loan payments with an income-driven repayment plan, hunt for cheaper car insurance or cancel subscriptions you don’t need.
Transparency is the best policy
Deciding to stick to a budget might put you in a different financial position from that of your friends or family. Tell them.
You don’t have to craft a sob story to win their sympathy; instead, clearly and honestly share your current priorities. Let them know whether your strict spending plans are short- or long-term so they’ll know whether to keep inviting you to those pricey concerts.
And instead of turning down invitations, turn them around. You could say, “Theater tickets are beyond my budget right now. But I’d love to get together. Let’s go to free-admission day at the museum and pack a lunch to eat in the park.”
Plan (very far) ahead
These changes may feel small at first, but in time you’ll see a difference in your checking account — especially when you sock away manageable amounts for expenses or events on the horizon.
Even though Graney earns an irregular income as an actor, last year he saved an attainable $20 a month for holiday gifts. By December, he had $240 to spend on friends and family, and he didn’t have to take on credit card debt.
You can do the same for that trip to New Orleans. Pre-empt your most organized friend by suggesting a date far in advance and scouring flight deals. Living frugally doesn’t mean avoiding your social circle; it means taking on a more proactive and creative role.
This column was written by NerdWallet and was originally published by The Associated Press.