You’ve graduated and are now on your own. Pivotal moments in life such as graduation from high school or college are a great time to set financial goals and take action to accomplish them. Here are some tips to get you off to a good start:
Organize your financial records. Set up a system for filing checks, tax returns, debts and other financial documents.
Develop a budget and stick to it. If you can do this, you’ll avoid many financial troubles. Compare your net income (what you earn, after taxes) to your expenses (including food, shelter, clothing, entertainment and savings). Generally, housing, food and auto expenses should consume no more than 65 percent of your net income.
Limit spending. “The biggest financial mistake I see is a consumptive lifestyle—simply spending more than you can afford,” says financial expert Ron Blue, author of “Master Your Money.”
Avoid debt. Pay off debts, including student loans, as soon as possible, and then remain debt-free. Financial expert Dave Ramsey recommends a “debt snowball” approach: paying off small debts first, then reallocating payments to existing loans until the payments become large enough to consume all debts.
Delay buying a car. If you must buy a car, choose a good used one. Have a trusty mechanic check the vehicle before you purchase it.
Save. Set aside a percentage of each paycheck to save for future needs or desires—a car, further education and vacations, for example. And it’s never too early to begin saving for retirement. Participate in your employer’s 401(k) retirement plan. You’ll get immediate tax savings on your contributions. Plus, many employers match employee contributions, and earnings grow tax-deferred. In addition, experts suggest you set aside enough money to cover three to six months of living expenses, in case of a loss of income.
Get insured. Car, medical, and homeowner’s or renter’s insurance are musts. Check with friends or relatives for references on reliable companies and review policies annually to get the best rates and coverage.
Give. Allocate money from each paycheck to your local church or various charities. Giving benefits others, but also helps you keep financial matters in perspective.