College diploma? Check. Official job and title? Check. Regular income? Check.

Now that you’ve got a steady stream of paychecks, your next question is: What to do with the cash? New furniture for your new digs, a work-appropriate wardrobe, weekly fancy dinners out, or even a trek across Europe (once you accrue those vacation days, of course) are all pretty tempting.

You may tell yourself, “I make a decent living now, and I know how much I make in a year, so it’s easy to guesstimate that my spending is on track.” But marching to the beat of your own drum can lead you into a financial hole.

That’s why starting a household budget should be one of the first things you do in your adult years. A monthly budget gives you a clear picture of how much money you have coming in and how much is going out (a.k.a. your expenses). And it provides the insight needed to highlight areas where you should tighten your belt.

Even if you’ve never balanced a checkbook and always look at your online account balance with one eye shut, building a budget is easy. Here are a few suggestions for how to get started.

Step 1: Look at your paycheck

To create a budget, you first need to know your net monthly income, or after-tax income. This is your monthly take-home pay, not your total salary — an important distinction when figuring out how much you can spend on a monthly basis. Without this knowledge, it’ll be next to impossible to create a smart spending strategy.

Step 2: Distinguish your needs from your wants

Now it’s time to make a list of your essential expenses. This involves separating your “wants” from the “needs.” Needs usually include things like:

  • Housing costs (monthly rent or mortgage payment)
  • Transportation costs (car payment, fuel, public transportation)
  • Utilities
  • Food
  • Insurance
  • Internet, cable, and phone bills

Once you’ve tallied those costs, add them up and deduct your needs total from your after-tax income. Make note of that number.

Step 3: Calculate how much your wants cost you

Next, outline all the things you spent money on that don’t fall into the “needs” bucket, and tally up the total. The easiest way to do this is to look at your credit card statements from the last month or two. If you use cash to pay for things, keep a log for several days (or better yet, a couple weeks) of all your expenses.

Once it’s all written down, use a critical eye and note where you’re being your own worst enemy by overspending or wasting money on things you don’t need (or even want). Strategize on how you can modify your behavior to reduce these unnecessary expenses.

While it’s a-okay to splurge on occasion (we fully support treating yourself and your ship-in-a-bottle collection — or whatever floats your metaphorical boat), it’s important to do so in moderation.

Step 4: Add up all your costs

Jot down the total amounts of your “needs” and “wants” and see how they stack up against a common rule of thumb: the 50/30/20 budget. This popular money management plan says you should spend 50 percent of your take-home pay on needs, 30 percent on wants, and put the remaining 20 percent toward savings and any debts you may have, like school loans or revolving credit card debt.

Don’t freak out if your current financial picture doesn’t align with this ideal ratio. When you’re new to the workforce and earning an entry-level salary, it can be difficult to stick to this plan, especially if you’re paying down student loan debt.

But that’s exactly why a budget can be so useful. Matching up how much you spend to established guidelines can be a helpful way to identify where you’re earning an A+ — and where you can put in a little more effort and reduce your spending.

Step 5: Keep it up

Now that you have your budget created, here comes the harder part: sticking to it.

When it comes to minding your numbers, try out some of these tips:

  1. Be a stickler
    While putting 20 percent of your take-home pay toward savings and debt isn’t technically considered a “need,” try to treat it as one. Avoid dipping into that bucket to pay for “wants,” so you can pay down debts and afford future unknowns, should something arise. In fact, you could remove temptation by setting up monthly automatic savings transfers.
  2. Break it down
    If a monthly budget isn’t as manageable, try chopping it up into a weekly segment. A shorter time frame can make it easier to stay on track. That way, you won’t discover that you’re already pushing the limit of your budget with a week left in the month.
  3. Log on regularly
    Along those same lines, keep track of your purchases as they happen instead of totaling them up at the end of the month. Checking your balance online or reviewing your recent credit card charges is a great reality check for daily expenditures.
  4. Get everyone on board
    If other people (like your significant other) are supposed to follow your budget, make sure they’re on board with the financial goals you’re trying to meet. Involve them in the planning and share the impact of their spending on the 50/30/20 model to avoid accidentally going off the budget rails.

Getting the degree and landing your first job can be hard — but budgeting doesn’t have to be. Follow our simple guide and you’ll start off your adult years on solid financial footing.

Discussion questions:

  • Which expenses take up the biggest part of your budget?
  • Which items cause you to derail from your budget?
  • How do you stay motivated to stick to your budget?