by Christy Bieber | June 24, 2019
Graduating from college is a major milestone. Hopefully you'll be leaving school with a great full-time job and a generous salary. But you may also have debt to pay from earning your education, and you may be faced with some big financial responsibilities for the first time.
The steps you take immediately after graduation can affect your financial life for years, so you'll want to make sure you do all the tasks necessary to manage your money like a responsible adult. If you're not sure where to start when it comes to financial adulting, here are the seven key steps you'll need to take.
You want to make sure you're responsible with your income from your post-graduation job, and that means living on a budget. Your budget should prioritize saving, allocate an appropriate amount of money towards meeting essential obligations, and include some money set aside for fun.
Living on a budget will ensure you aren't spending too much or wasting money, and will help you to accomplish financial goals.
If you don't already have a credit card, you'll need to get one after graduation so you can start building credit. Look into a student card or secured card, which can be easier to qualify for without a strong credit history.
Make sure you use your card responsibly, which means paying off the balance in full each month to avoid interest payments and paying on time to build a positive payment history. You'll likely want to avoid cards with annual fees unless the card comes with generous perks and rewards you'll definitely take advantage of. And you should make sure you don't max out your cards, as using too much of your available credit can hurt your credit score.
Retirement probably seems very far away, but chances are good you'll need to have over $1 million to have a comfortable life as a senior citizen by the time you hit retirement age. You need to start saving when you're young to build a big enough nest egg to avoid financial worries during your golden years.
Ideally, you should save 15% to 20% of your income for retirement, including any employer match that your company may provide to you (an employer match is money your employer matches when you make 401(k) contributions).
If you can't save 15% right away, start with saving as much of your income as you possibly can, and then increase the amount you save each time you get a raise. Both a 401(k) offered by your employer or an IRA you open with a broker provide you with tax breaks for saving that can make it easier to put aside money. If you set up automatic contributions from your paycheck right away when you start your job, you'll never miss that extra money because you won't get used to having it.
Now that you're a financial adult, you face all of the potential life emergencies other adults face -- including things like unexpected car repairs, surprise medical expenses, or job loss. You need an emergency fund to cushion you against those bumps in the road so you don't end up in debt or unable to pay your rent.
It's ideal to have three to six months of living expenses in an emergency fund. It will likely take you time to save that much, but if you allocate at least some of your money each month toward an emergency savings account, you can start building up your fund ASAP.
In addition to an emergency fund and saving for retirement, it's also a good idea to save up for other financial goals. You'll probably also have some big expenses you'll need to incur, whether that's a vacation or weddings of friends or new furniture for your apartment. You'll want to save up for all this stuff too.
To make sure you know what you're saving for -- and that you're saving enough -- set a few SMART financial goals. SMART goals are Specific, Measurable, Attainable, Relevant, and Timely. That means you should have a deadline for your goal, be specific about the dollar amount you want to save, and make sure your goal matters to you.
Once you have your goals, you can dedicate some of your budget to saving for them -- and can track your progress.
You may be able to stay on your parent's health insurance until you're 26 years old, but this isn't always the best or most practical option. The key is to make sure you have some health coverage, whether you get it from your parent's, an employer, or buy it on the individual market.
You should consider other types of insurance as well. If you'll be driving, having auto insurance is required by state law. And if you rent a property, you should have renter's insurance -- unless you could afford to replace all your possessions or to personally compensate someone who gets hurt in your apartment.
Having the right insurance is essential to protect you from devastating financial loss in case something goes wrong, so never go without a policy you need.
It may seem like a lot to do, but taking these seven steps can help you set yourself up for tremendous financial success. The sooner you start checking items off your financial adulting checklist, the better off you'll be when it comes to managing money -- so start as soon as graduation day passes.
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