Now that you have a disposable income, you would think it would be easy to start accruing savings and paying off loans. However, there are many mistakes that recent graduates make that endanger their financial stability when becoming young professionals. The financial lifestyle and habits you establish now will set the stage for your financial future. Here six steps you can take to make sure you’re on the right path.
1. Budget, Budget, Budget!
It seems simple: don’t spend more than you make. But when your first real paycheck comes in and you now have enough money to buy everything on your Amazon wish list, it may be a little too easy to splurge. Next thing you know it’s the end of the month and there’s not enough money left to pay your rent and those shiny new student loans. That’s were budgeting come in. By creating a budget and sticking to it, you’ll be able to pay off debt faster, stress less about living expenses, and splurge guilt-free with what’s left over. You can use an online budgeting tool, such as Money Manager, to track your spending and create your budget.
2. Don’t Forget to Include an Emergency Fund
One of the most important items on your budgeting list is an emergency fund. Whether it’s a blown tire or an unexpected layoff at work, unpredictable expenses can wreak havoc on your bank account. Start putting some money away immediately, no matter how small the amount, and aim to have three to six months living expenses in your emergency fund at all times. A bank savings account is a smart place to stash your cash for a rainy day.
3. Pay your Bills (And do it on time)
A few late payments here and there may not seem like a big deal now, but each missed payment can hurt your credit history for up to seven years. This can negatively affect your future loan approval, the interest rates you pay on loans, and potentially your ability to get a job or rent an apartment. Consider setting up automatic payments for regular expenses like student loans, car payments, and phone bills so you’ll never have to worry about missing a payment.
4. Watch Your Credit Card
Credit cards have a lot to offer—they make online shopping safer, help you build your credit score, and are very convenient when traveling abroad. However, they can quickly become a nightmare if you’re spending more than you can afford to pay back. Find a card that best suits your needs, and then use the budget you created earlier to set a limit on how much you spend on your credit card.
5. Think Long Term
Retirement may seem like a long way off now, but the sooner you start saving, the sooner it will be here. You can set up a personal account like a Roth IRA and/or contribute to your employer's 401(k) or similar account. This is especially beneficial if there is a company match. Don’t be afraid to invest enough to qualify for your company's full match - it's free money!
6. Remember it’s okay to ask for help
Being financially independent for the first time is exciting—and overwhelming. As your bank, we’re here to help make the transition smoother. Most banks offer online, mobile, and text banking tools to manage your account night and day. You can use these tools to check balances, pay bills, deposit checks, monitor transaction history, and track budgets. Just because you’re now “independent” doesn’t mean you have to manage your money alone.
At Central Bank your financial future is very important to us and we're here to help you kick start your finances on the path to success. As always, feel free to reach out to us for any financial questions or concerns you may have. We are more than a financial institution. We are a trusted resource, and we're here to help you.