How to start out on strong financial footing.
Starting your life as an independent adult can be exciting but it can be hard during an economic downturn. It may take longer than you expect to get a job and achieve dreams like renting your own place or buying a car. Building smart financial habits can help. Here’s a quick reference to help you get started.
Take stock of your current financial situation.
Create a budget based on your take-home pay after taxes are deducted and your monthly bills, including your college loan and credit card, are paid. (See “Building a Budget.”) If you’re saving for a car or home, add these as monthly expenses. You may find that having automated payments deducted from your checking account and deposited in a savings account help keep you moving toward your goals. Even depositing a small amount, such as $25 a month, will help. You can increase your monthly deposit once you earn more. Don’t wait until you have money left over from your paycheck or the day you start your savings account may never come.
Savings Tip #4
Sharing a ride with just one person can cut your driving costs dramatically by shrinking your fuel bill and cutting wear-and-tear on your car.
Keep your overhead low.
Housing costs can eat up a lot of your salary, especially if you live in a major metropolitan area. A good rule of thumb is to limit your housing costs to no more than 25% of your take home pay. Sharing an apartment with friends can reduce your expenses, or it may make sense to move back home with your parents, if you’re all comfortable with the idea. If you go this route, offer to pay rent, do chores and contribute to household expenses. In today’s economy, they’re likely to appreciate the help.
Know your credit score and protect it.
Know it: You can find out what it is from one of the major credit reporting agencies, such as Equifax®, Experian® or TransUnion®. Your score, based on how you have handled your finances in the past, will affect your ability to get credit and rent an apartment. Some employers may also check your score to gauge your potential to be a reliable employee.
Protect it: Avoid running up more credit card debt than you can pay and don’t miss payments on bills. Also, checking your credit report may turn up errors in your favor; get these cleared up promptly by writing to the appropriate financial institutions.
Take action now.
Create a budget today. (See “Building a Budget.”) You may think it’s a waste of effort if, for instance, you’re working at a low-paying part-time job while you look for a better full-time one. It’s not. Sticking to a budget is a great habit that will serve you well for the rest of your life. And when you earn more money, you’ll have the skills to make it stretch much further for you.
What's next? Meeting financial goals after graduation