You’ve got a new job and are about to move into your own place. While this is exciting it also comes with new responsibilities.
Luckily there are a few keystone habits, which if you develop now, will keep you on a solid financial ground well into your future.
Here’s what you need to know about money management and smart financial habits.
Contribute to a Retirement Account (Now!)
After securing your first job you’ll be given paperwork to set up a retirement account. While it’s tempting to want to skip the contributions and keep all of your money for fun stuff, it is absolutely crucial that you put as much money into your 401k as you can.
Ideally, you should be contributing at least enough to get the full employers match, if offered. If your new job doesn’t offer a retirement plan go ahead and set yourself up an IRA.
By investing now you’ll give your money plenty of time to grow. And thanks to the power of compound interest the younger you get started investing the less money you have to stash away.
Track Your Expenses
Tracking your expenses can seem like a daunting task but it’s something you need to do for at least the first few months you’re out on your own.
Keep a record of all the money you spend and where it’s being spent. This will open your eyes to your current money habits. You can then examine your spending each week or month and analyze which areas need to be cut back. This will also help you plan a budget.
Create a Budget
Budgets are not meant to be restrictive. In fact, they’re meant to be freeing.
When you set up a budget you’re telling your money where to go. This doesn’t mean you can’t buy Starbucks, go to parties, or take vacations. It just means that you’re being intentional in the way you spend your money.
Create a budget first logging in all of your necessary spending (think: rent, food, utilities.) Then record everything that you know you’re going to spend money on and assign an amount (clothes, transportation, food, etc.) Lastly, create financial goals and allot certain amounts to go toward them each month (emergency fund, down payment, paying off student loans, vacation, etc.)
Tweak as you see fit.
Lower Recurring Monthly Bills
To get the most out of your budget look at your recurring monthly bills and see which ones you can lower.
You can lower your cell phone bill by switching from a contract phone to pay as you go, which in my opinion are the best cell phone plans for young adults. You can shop around for cable TV or simply call and ask for a lower rate. There are literally a hundred different ways you can save money on recurring bills. Just do the work!
By doing this you’ll make room in your budget for the more fun and important items.
Pay down Debt
How much did you take out in student loans? How much debt do you still have?
You need to work on aggressively getting rid of your debt. You can’t create a solid financial foundation when you owe everyone money.
It might take years but you need to get out of debt and commit to staying out of it!
Taking a few minutes every week to review your spending and make sure you’re on track with your financial goals will help you to build lasting financial habits.
What financial advice would you give to a recent college grad?