As a new hire just graduated from college, I had three buckets of spending: necessities, savings and discretionary. Necessities were highest priority, followed by savings and discretionary. Necessities had to be paid each month. Savings were next for a emergency fund, future purchases and retirement savings. Discretionary was for fun. Here's what was in those categories.
Necessities: Rent, utilities, groceries, student loans, auto costs, insurance (health, rental, disability) and clothing. These are the must cover expenses.
Savings: Emergency savings for unexpected cost, savings for future large purchases, retirement savings.
Discretionary: entertainment, vacations, eating out, upgrade phone/computer
Personally, I managed necessities to be the lowest cost acceptable. I rented a lower cost apartment close to work. It was half the cost of a nearby luxury apartment other new hires rented. I used coupons for groceries and bought items that were on sale. I had a low student loan payment that was less than $100/month. I drove a 13 year old hand me down car for the first 2 years. My parents gave me my bedroom furniture, and recreation room furniture from their house and I used them for several years.
I ran out of money with two days left in the first month, but was able to adjust and save money the second month. For discretionary spending, I kept costs to a minimum by playing rugby ($25 fee/season) for entertainment and cooking most of my meals.
As my income increased, I was able to save more and spend more on discretionary items. Eventually, I was able by a new car because I had kept my initial necessity costs lower.
For more on
The Practice of Personal Finance, check back every Wednesday for a new segment.
This is not financial advice. Please consult a professional advisor.
Copyright © 2026 Achievement Catalyst, LLC
Subscribe to My Wealth Builder
