When it comes to salaries and income, sometimes people shy away from open discussion about it out of shame or fear of what others may think. But it’s important to do research as well as have open conversations with appropriate people in your life throughout your career to have a solid grasp of what you can (and should) be making for your hard work. While your financial needs themselves are not the only thing to consider, it’s vital that you know what you need to have a starting place for financial planning and salary conversations in the future. Here are three important tips for determining how much you need to earn for your living.
Include All of the Basics
It may seem obvious, but you’ve got to start at the basics. Write down all of the necessary costs you have such as rent, groceries, insurance, clothing, utilities, phone, transportation, and any other essential costs you have on a regular basis. Be sure not to forget about the basic annual or biannual costs as well (like vehicle registration), as those can sneak up on you and surprise your budget throughout the year. You can always use an online budget calculator or two to help make sure you’re not missing anything important or miscalculating anything too much.
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Include Margin for Savings and Unexpected Costs
While the immediate necessities take precedence in determining your financial needs, it’s important to include appropriate margin for other costs such as savings and unexpected issues that may arise. Don’t underestimate the importance of these things, and don’t feel guilty about including them in your idea budget. The fact of the matter is that it’s totally appropriate to set yourself up to be able to save on a regular basis for when your car breaks down or your house gets struck by lightning. It’s also important to be saving for specific goals down the road and to have a good idea of what you’ll need for them. For example, if you want to buy a house someday, use an online mortgage calculator to start getting an idea of how much you’ll need in your area to do so. Even an appropriate amount can reasonably be designated for slush funds or vacation funds, as these activities are part of keeping yourself healthy and well-rested throughout your work life.
Talk to Trusted Friends for Feedback
It may sound simple, but talking to others about what they think are reasonable living costs and what they have done to organize their finances can be a huge help. It can also be a source of moral support when you’re just starting out or navigating a big transition in your career or financial journey. But just be careful to know your audience and not get too intense about your pursuit of financial wisdom. A Guyana-based professional, Carlton James, notes that “a conversation can quickly start to feel like a cross-examination if one of the participants starts quizzing their addressor,” but that “effective communication is a two-way street.”
Determining your financial needs is an important step toward financial health, and these three simple steps can be a great start to doing so. Down the road, you’ll thank yourself for putting the time and energy into it.