3 Steps to Surviving on an Entry-Level Salary

UPDATED: September 11, 2023
PUBLISHED: June 3, 2015
happy gen z woman thriving on an entry-level salary

Earning your first paycheck after college is all kinds of fun—until you see all of the bills that come with it. You want to put away money for that trip to see your best friend or that new car you’ve been eyeing, but you’re just not sure how to scrape together any savings on your entry-level salary.

Meeting your savings goals in your 20s may be a difficult task if you only have an entry-level salary to cover all of your expenses, not to mention if you’re among the roughly 43 million Americans with federal student loan debt, according to Bankrate. But by taking some time to examine and understand where your money goes, you can set up a spending and saving plan that fits your lifestyle.

Here are three steps you can take to live (and thrive) on an entry-level salary:

1. Pick a split that works for your entry-level salary.

Experts often suggest splitting where your money goes into three categories: fixed costs (about 50%), savings/investments (about 20%) and spending money (about 30%), or the 50/30/20 rule. Maybe that works for you, maybe it doesn’t. It all depends on your financial goals.

The idea is to understand your costs and plan for them accordingly. If you expect to live at home for a bit, you can generally lower your fixed expenses and increase your savings. If you’re going to live in the city, plan to put a bigger portion of your entry-level salary toward your fixed expenses to cover rent.

2. Add up your monthly fixed costs.

What do you spend money on? Maybe more than you realize. Print out your debit or credit card statements for the past three months and make a list. Here are a few things to help you get started.

I need these:

  • Housing
  • Groceries
  • Clothes

I wish I didn’t have to spend money on these, but I do:

  • Cellphone
  • Utilities (power, water, internet service)
  • Transportation (gas, car insurance, bus pass, taxis, bike-share membership)
  • Moving costs
  • Health insurance (if not taken out of pay)
  • 401(k) contributions
  • Student loan repayments
  • Rainy day fund contributions

3. Subtract your costs from your income.

Where do you stand?

Say your entry-level salary is $45,500 annually and you take home $3,600 each month before taxes. Subtract your fixed expenses from that amount. If the costs listed above come to, say, $1,800, then what you’re left with is what you’ll divide between extra costs today and putting away for the future.

Extra costs:

  • Haircuts
  • Toiletries
  • Gym memberships
  • Manicures/pedicures
  • Doctors’ bills and copays
  • Streaming services
  • Travel and event tickets
  • New gadgets

If you don’t already use a money-management app—for example, Mint—check to see whether your bank lets you sort your statements by category. This will help you to see where all of your extra cash is going.

This article originally appeared on NerdWallet. Alexandra Rice is a former editor and content strategist for NerdWallet. This article was updated July 2023. Photo by Ground Picture/Shutterstock

NerdWallet.com provides information, insight and consumer-driven advice about personal finance, helping people lead better lives through financial education and empowerment.