You’ve finally got that nice piece of paper that cost you a few grand to earn and you’ve landed a job that will pay the bills. Your first paycheck will probably be many times higher than what you made as a college kid. Don’t make foolish moves now that you’re a full-fledged grownup; take actions that will take you from your former ‘broke college student’ self to a ‘financially free’ adult. Here are five actions to help you:
1. Watch Your Credit
What’s in your wallet? If you’ve got a credit card or two, then you’ll want to make sure to check your credit report each year. There are three bureaus that create credit reports and you can get a free copy from each company every year. If you find errors, you’ll need to dispute them. You should also sign up for identity theft protection with a company such as Lifelock. They will help you get everything straightened out in the event that your identity is stolen. From notifying you of any suspicious activity to securing your overall identity safety, Lifelock handles every aspect of protection.
2. Create and Follow A Budget
Now that you’re out of college and have your first job, you need to make sure that you know where every dollar comes from and where it’s being spent. To make a budget, list your income sources at the top of the page, add them up, then start subtracting your expenses. Take out old receipts to get a feel for how much you spend in a typical month. Don’t forget things like insurance and your student loans. It might take a few months to get the hang of budgeting, but once you do, you’ll feel like you got a raise as it will seem like you have more money to play with.
3. Pay Off Debt Quickly
If you’re among the millions of college grads who have student loans, and maybe a car payment to boot, try to pay them off as quickly as possible so that they aren’t hanging over your head. Paying more than the minimum will help you get them paid off years sooner and save hundreds, if not thousands, of dollars in interest.
4. Build An Emergency Fund
Your probably no stranger to the occasional emergency–like a flat tire or broken glasses. These are things that you don’t exactly budget for, so an emergency fund will keep your budget on track even when life gets in the way. As you start your journey to financial freedom, an emergency fund of $1000 is sufficient. Once you’re debt free, build it up to three to six months your monthly expenses for added security.
5. Save For the Future
As soon as you are financially able, you should start saving for future expenses like your wedding, possible children, dream vacations and retirement. With the uncertain future of social security, it’s important to open a 401k or Roth IRA and start contributing immediately. Your goal should be to put aside 15% of your annual income in retirement funds. See if your employer offers matching funds and take them up on that to get free money. For non-retirement savings goals, try to determine how much you’ll need and when you’ll need it.
These are some of the most important things that you can do as a young college grad. Don’t wait until you’re in your mid-thirties with a two kids and one income to get your financial life in order. Now’s the time to take control so that you can have a future where you don’t worry about getting out of debt and starting to save for old age. Planning, budgeting, and investing in identity protection, are solid ways to secure a future for you and your family. Your future self will be glad that you did.
Need more tips on saving money? Get Living On A Dime – Save Money And Get Out Of Debt, tips which range from saving money on food, with kids, and even when sick.
This guest post was written by Don Stasiak. Don studied finance in college and now writes columns for financial magazines and blogs.