Landing your first real job feels like winning the lottery, especially when you see that salary number on your offer letter. But before you start planning your dream apartment or shopping spree, here’s a reality check: your take-home pay will be significantly smaller than what you negotiated. Between federal taxes, state taxes, Social Security, Medicare, and other deductions, you’ll likely pocket only 60 to 70 percent of your gross salary.

The average entry-level salary varies widely by field and location, but according to recent data, most new graduates can expect to earn between $45,000 and $70,000 annually. That might sound decent on paper, but learning to live on this amount while building good financial habits requires some strategy.

Understand Your Real Income

Before creating any budget, you need to know exactly how much money hits your bank account each month. Look at your first few paystubs to understand what gets deducted from your gross pay. Common deductions include:

• Federal and state income taxes • Social Security and Medicare taxes (FICA) • Health insurance premiums • 401(k) contributions (if you’re participating) • Other benefits like dental, vision, or life insurance

Once you know your actual take-home pay, you can build a realistic budget around that number. If you’re earning $50,000 annually but only taking home $35,000 after deductions, that’s what you need to work with.

Start With the 50/30/20 Framework

The 50/30/20 budget rule provides a simple starting point for new workers. Here’s how it breaks down:

• 50% for needs: Rent, utilities, groceries, minimum debt payments, transportation, and other essentials
• 30% for wants: Dining out, entertainment, shopping, hobbies, and discretionary spending • 20% for savings and debt repayment: Emergency fund, retirement contributions, and extra debt payments

On a $35,000 take-home income, this means $1,458 monthly for needs, $875 for wants, and $583 for savings and debt repayment. Remember, this is just a framework. You might need to adjust these percentages based on your location’s cost of living and your specific circumstances.

Tackle Your Fixed Expenses First

Start by listing all your non-negotiable monthly expenses. These typically include:

Housing: This is usually your biggest expense. Try to keep total housing costs (rent, utilities, renter’s insurance) under 30% of your gross income. If you’re earning $50,000, aim for no more than $1,250 monthly for housing. Consider roommates to keep costs down.

Transportation: Whether it’s a car payment, insurance, gas, and maintenance, or public transit costs, factor in all transportation expenses.

Insurance: Health insurance (if not provided by your employer), renters or auto insurance.

Minimum debt payments: Student loans, credit card minimums, or any other debt obligations.

Basic necessities: Groceries, phone bill, internet, and other essentials.

Build Your Emergency Fund Immediately

Even on a tight budget, building an emergency fund should be a top priority. Start with a goal of $500 to $1,000, which can cover small emergencies like car repairs or medical bills. Once you have that foundation, work toward saving three to six months of basic living expenses.

Set up automatic transfers to move money into savings as soon as you get paid. Even $50 per month adds up over time. Treat this transfer like any other bill you can’t skip.

Make Smart Housing Decisions

Housing will likely eat up the biggest chunk of your budget, so choose wisely. Consider these options:

• Live with roommates: Splitting a two-bedroom apartment is often cheaper than getting a studio on your own
• Stay at home longer: If possible, living with family for a year or two can help you save money and pay down debt
• Choose location carefully: A slightly longer commute might mean significantly lower rent
• Negotiate: Some landlords will work with you on move-in costs or include utilities

Don’t rush into expensive housing just because you have a job. Start conservatively and upgrade later as your salary grows.

Handle Student Loans Strategically

If you’re one of the 44 million Americans with student loan debt, this will likely be a major budget item. Before your grace period ends, research your options:

• Income-driven repayment plans: These can lower your monthly payment based on your income
• Refinancing: If you have good credit, you might qualify for lower interest rates
• Employer benefits: Some companies offer student loan repayment assistance

Don’t let student loans derail your entire budget. If the standard payment is too high, explore alternatives rather than defaulting.

Start Retirement Savings Early

It might seem impossible to think about retirement when you’re barely covering current expenses, but starting early is crucial because of how compound interest works. If your employer offers a 401(k) match, contribute at least enough to get the full match. This is free money you can’t afford to pass up.

If you can’t afford the full match immediately, start with 1% of your salary and increase it whenever you get a raise. Even small amounts make a difference over time.

Control Lifestyle Inflation

Here’s where many new graduates stumble. Just because you have a steady paycheck doesn’t mean you need to upgrade everything immediately. Resist the urge to:

• Get the most expensive apartment you can “afford”
• Buy a new car when your old one works fine
• Sign up for every subscription service
• Eat out constantly

Instead, continue living like a student for a few more months while you adjust to your new income and establish good financial habits.

Track and Adjust Regularly

Your first budget won’t be perfect. Track your spending for at least three months to see where your money actually goes versus where you planned to spend it. Use apps like YNAB or EveryDollar, or simply track expenses in a spreadsheet.

Look for patterns and adjust accordingly. Maybe you budgeted $200 for groceries but consistently spend $300. Rather than feeling guilty, adjust your budget to reflect reality and find cuts elsewhere.

Plan for Income Growth

The good news about entry-level salaries is they’re just the starting point. Most people see salary increases through raises, bonuses, or job changes within the first few years. When your income does increase:

• Put at least 50% of any raise toward savings or debt repayment before increasing your lifestyle spending
• Bump up your retirement contributions with each pay increase
• Build up your emergency fund to the full three to six months of expenses

Stay Motivated

Budgeting on a rookie salary requires discipline and patience. Focus on building habits that will serve you well as your income grows. Remember that many successful people started exactly where you are now. The financial discipline you develop during these lean years will pay dividends throughout your career.

Your entry-level salary might not fund the lifestyle you ultimately want, but it’s the foundation for everything that comes next. Make it count.