If you are like me and many other developers, getting a job in tech is a big financial milestone. You get that first paycheck and suddenly the world is yours. You buy a round (or six) of drinks with your friends, get a new bed, and upgrade your desk chair. And then you see your bank account the next day. Oops.
Ok, so maybe that’s not the case exactly, but if you’re like me, you’ve got rent, a car payment, and student loans - all that can be super confusing and hard to manage. That doesn’t even scratch the surface of financial management though! Soon you might have a 401k and health insurance. Plus, saving some money and shelling some into the stock market are never bad ideas.
However do you learn to manage all that?
Well not to fear, I am going to attempt to give a quick and dirty rundown of some basic financial management. I have to note here - I am not an accountant and while I do have a degree in economics, that makes me about as qualified to give you advice as me being from Indiana does. This is advice that has worked for me and some other people on the internet - your situation might be different and you should definitely get a good finance person if you need it.
Step 1 - Get those bills under control
For the purpose of illustration, let’s come up with a fake developer “Alex” who makes $80,000 a year base salary with a $10,000 possible bonus. They’ve got $500 a month in student loans and $1400 a month in rent. These numbers are based around a standard person living in Indianapolis (what I know), they may not be illustrative of your situation, but hopefully, this work as an example! You can also check out the finished budget here Feel free to make a copy!
So first things first, you’re gonna want to find out how much money you have coming in each month. Start a Google spreadsheet (no need for fancy software right now) and set it up like so:
Let’s start by adding the monthly income (this will depend on how you are paid - for our example Alex will get paid twice a month once on the 15th and once on the 30th).
Here is a super easy calculator to determine how much you will make after tax. Let’s plug in the “bi-weekly” number from that calculator. We can also use a really simple Google Sheets formula to calculate the running total of how much we will have at the end of the month.
For the first cell, add a Total column with the formula:
=B2-C2. In the next row add this formula:
=B3-C3+D2. Then drag down for the rest of the columns.
Here’s a gif showing you what I mean:
Sweet. Now that that is done, let’s add some of our bills.
Step 2 - Save some money
A penny saved is a penny earned and you’re gonna want to have some money put back in case of emergencies.
A good basic rule to follow is the 50/30/20 rule - basically, put 50% of your income to necessities (rent, food, a car payment, etc), 30% into whatever you want (computer upgrades, drinks with friends, etc), and 20% into savings. If you can’t do that much, pay whatever you need to for needs and split the leftover 60/40 between wants and savings. Obviously the more you save, the better off you will be but remember to treat yourself some. Just like dieting can actually cause to gain weight, too strict of a budget can cause you to spend more money than you should. Let’s add savings of 20% to Alex’s budget:
Step 3 - Profit?
Once you start having some money put back into savings,