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7 Finance Tips for New Grads Starting Their First Job

August 09, 2022

Your introduction to the full-time working world can be daunting. Here are some budgeting and finance tips that will help guide you through this milestone.

Did you recently graduate? Are you starting your first full-time job? Understanding your finances can be overwhelming. We have some tips that will help you get started on a solid financial future.

7 finance tips for your first job

  1. Make a budget- It is wise to understand the amount of money going into your accounts vs. the amount of money coming out. Look at your fixed costs (rent, utilities, student loans, food, transportation, etc.) and variable costs (shopping, vacations, etc.). Make sure that your expenses do not outweigh your income. A good rule of thumb is the 50/30/20 rule—spending 50% of your budget on essentials, 20% on savings and investments and 30% on nonessential items like dining out and traveling.
  2. Start saving! Start building a cash reserve- It is helpful to regularly set aside a portion of your paycheck to start building a savings account. Many new grads benefit from automatic savings plans in which you arrange for a specified portion of your paycheck to be automatically deposited into your savings plan. For many new grads just starting out, this makes it easier to stick to a personal budget.
  3. Hesitate to open credit cards- Don’t open a credit card just because it seems like a good offer (rewards program, low interest rate, etc.) Your credit score takes a hit every time you open a new account, and when you have multiple cards, it can be tempting to use them and drive up your balances. Only charge what you can afford to pay! Pay off any charges each month and do not carry balances. This will help you learn to live within your budget.

  4. Start tackling debt-Fortunately, most student loans have a six month grace period, so your first payment likely won’t be due until late fall if you graduate in the spring. However, if you are in a position to start paying, you’ll save on interest and establish the habit of paying. If monthly payments on a federal loan are too high, you can apply for an income-driven repayment plan that caps payments at 10% to 20% of your income and forgives the remaining balance after 20 or 25 years. Making timely student loan payments will help you build and maintain credit. Consistent payments reflect positively on your credit, and accessing the best rates on loans, insurance, mortgages, rentals etc. depends on a good credit score (a score in the high 600s or above). You should thoroughly research any consolidation plans you are considering and make sure you completely understand all of the terms.
  5. Start saving for retirement- The day you start working is the day you should start saving for retirement. Your employer might offer a 401(k) match—aim to contribute at least enough to get the full match. It’s additional money. If your company does not offer a retirement account, you can open an individual retirement account (IRA) through a financial advisor. A Roth IRA can offer tax benefits to new graduates.
  6. Read up on your health insurance options- If you’re under age 26, you may still be on your parent’s plan. If not, you will likely be able to enroll in group coverage at your new job. Employer sponsored coverage typically offers great benefits and employers generally pay a portion of the premiums. In addition to health insurance, consider dental, vision, disability and life insurance coverage, too. Your Human Resources department will be able to help you sort through your options.
  7. Set up an emergency fund. If possible, you might want to set aside some discretionary money in the form of an emergency fund. You will be significantly more prepared should you run into any financial issues or worst case, unemployment. Building up a cushion/emergency account with at least 6 to 12 months salary can bring you peace of mind!

Sticking to a budget can be tough once you get that first paycheck and wave of independence…but starting early will ensure you are set up for success in your 20s and beyond.

Wondering how else you can start planning for the future? Our whitepaper, “Financial Planning For Every Stage of Your Life” has some great ideas on what you should focus on as you meet different milestones—getting married, having children, buying your first home and more. Download it here.

Investment Advisory Services offered Through KLR Investment Advisors LLC

Investment Advisor Representative

Insurance Services offered through KLR Insurance Advisors, LLC

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