A diploma and a first job kick off your financial adult life. When the “I have no idea what I’m doing” freakout hits, these eight money moves will help you start strong.
Whether you’re graduating from high school or college, a diploma and a job represent the beginning of your personal — and financial — adult life. It’s an exciting, sometimes overwhelming time.
When you have the inevitable “I have no idea what I’m doing” freakout, remember these tips:
1 Set Clear Financial Priorities
You probably can’t save, invest and pay off debt all at once, so prioritize in this order:
Save $500 for emergencies, because there will be emergencies
If your employer offers a 401(k), contribute at least enough to get any “employer match” — it’s free money
Pay down high-interest debt, like credit cards
2 Learn a Simple Budgeting Strategy
Identify your after-tax income on your pay stub, then use the 50/30/20 rule as a budgeting guideline:
Use 50% for necessities like rent, groceries, transportation, utilities and minimum loan payments
Put 20% toward savings and debt repayment
Spend 30% on nice-to-haves like restaurants, travel and entertainment
If 50% isn’t enough to cover living expenses, dip into your nice-to-haves bucket.
3 Learn How Credit Works and Why It Matters
Credit is adulthood’s currency. You need good credit to qualify for travel rewards credit cards, get the best rates on loans and insurance and eventually buy a house. To have a good credit score, you generally must:
Use credit by taking out loans and opening credit cards. You don’t need to carry a balance on them, though
Consistently make payments on time
Use less than about 30% of your available credit. If you have a card with a $3,000 limit, for example, charge no more than $1,000
Check your credit score to see where you stand. If you have bad credit or no credit, consider getting a secured credit card or credit-builder loan to boost it.
4 Do Some Money Multitasking
In fact, credit-builder loans can help establish credit and save money at the same time.
You can get credit-builder loans through some credit unions, community banks or the online lender Self Lender. Borrow a small amount — say, $1,000 — and repay in installments over a year or two. The lender holds the cash until the loan is repaid. Then you’ll get the money, minus some interest.
Assuming you make full, on-time payments, you’ll get some positive credit history under your belt — and have cash on hand for that emergency fund or retirement account.
5 Leverage Your Youth to Build Wealth
Speaking of retirement, saving for it is one of the best uses of your cash now. Compound interest over decades is like magic: A small amount invested today will be worth more than a larger sum you invest 10 years from now. For example, every $1,000 you invest at age 22 becomes nearly $20,000 at age 72, assuming a 6% rate of return, according to NerdWallet’s compound interest calculator. If you put off starting by a decade, you’d have to save almost double to have the same amount by age 72.
6 Start Saving for Retirement
We didn’t use age 72 by accident — that’s the age at which the class of 2018 can expect to retire, assuming they contribute 6% of their incomes to a 401(k) and have a 50% employer match, according to a 2018 NerdWallet analysis. If your employer offers a 401(k) with a match, sign up and contribute at least enough to get the match. Increase your contributions annually or whenever you get a raise.
If you don’t have an employer-sponsored retirement account, open a Roth IRA through a brokerage or robo-advisor and contribute up to $5,500 yearly. The account’s earnings will be tax-free.
7 Make a Plan for Your Student Loans
Student loan payments typically come due six months after you leave school, giving you time to get a job before payments begin. But interest accrues during this grace period — except on federal subsidized loans — so begin making minimum payments sooner if possible. Once you have very good credit and a job with a steady income, consider refinancing your student loans to save money by lowering your interest rate. If payments on your federal student loans are overwhelming, review your options carefully. Income-driven repayment and Public Service Loan Forgiveness may offer relief, but both require meticulous attention to detail and annual maintenance to pay off.
8 Research Your Job’s Market Value
Advocating for yourself can be a particularly challenging part of adulthood. As your career progresses, you’ll feel empowered to negotiate your salary if you back your ask with hard numbers. Research the going rates for similar roles in your field, at your skill level. Then, reference your findings during the negotiation conversation. Even if the employer declines, they’ll likely respect your preparedness and confidence.
The article How to Manage Money in Your 20s originally appeared on NerdWallet.
Share:
Billshark · Bill Negotiation Experts Helping consumers and small businesses stop overpaying on recurring bills.
Frequently Asked Questions
What should I prioritize first when I start earning?
Tackle three things in order: first, save $500 for emergencies, because there will be emergencies. Second, if your employer offers a 401(k), contribute at least enough to get any employer match, since it’s free money. Third, pay down high-interest debt like credit cards. You probably can’t save, invest and pay off debt all at once, so following this order keeps you focused on what matters most as you start out.
How does the 50/30/20 budgeting rule work?
Start by identifying your after-tax income on your pay stub, then split it three ways. Use 50% for necessities like rent, groceries, transportation, utilities and minimum loan payments. Put 20% toward savings and debt repayment. Spend the remaining 30% on nice-to-haves like restaurants, travel and entertainment. If 50% isn’t enough to cover your living expenses, dip into your nice-to-haves bucket to make up the difference.
How do I build a good credit score?
To have a good credit score, you generally must use credit by taking out loans and opening credit cards, though you don’t need to carry a balance. Consistently make your payments on time, and use less than about 30% of your available credit. With a $3,000 limit, for example, charge no more than $1,000. If you have bad or no credit, consider a secured credit card or credit-builder loan to boost it.
Why should I start saving for retirement so young?
Compound interest over decades is like magic, so saving early is one of the best uses of your cash. Every $1,000 you invest at age 22 becomes nearly $20,000 at age 72, assuming a 6% rate of return. If you put off starting by a decade, you’d have to save almost double to reach the same amount. If your employer offers a 401(k) match, sign up; otherwise open a Roth IRA.
When do student loan payments begin, and can I lower them?
Student loan payments typically come due six months after you leave school, giving you time to find a job first. But interest accrues during this grace period, except on federal subsidized loans, so begin making minimum payments sooner if possible. Once you have very good credit and a steady income, consider refinancing to lower your interest rate. If federal payments feel overwhelming, look into income-driven repayment and Public Service Loan Forgiveness.
Class of 2018: 8 Ways to Prep for Financial Adulthood page context
Class of 2018: 8 Ways to Prep for Financial Adulthood is a Billshark page. It can help you with your bills and your choices, and it can show you how to save.
New graduate? Learn 8 ways to prep for financial adulthood: set priorities, budget with 50/30/20, build credit, save for retirement. Start strong today.
Use this page to learn about Billshark. Then go to the part of the site that fits what you need. Small steps add up. You can save a lot over time.
We share this page to help you make sense of your monthly bills, your choices, and what to do next. Keep this page handy. Ask us if you get stuck.
This page links you to more help from Billshark. Use it when you want more detail or a clear next step. You can save a lot over time.
Got a question about a bill you pay each month? This page can help you find the best answer. Read on to learn more. Small steps add up.
Read each part of this page at your own pace. If you need more help, go on to a guide on your topic. It is free to read. Keep this page handy. Ask us if you get stuck.
We put facts and tips in one place. This makes it easy to learn about the bills you pay at home. We are here to help. It only takes a few minutes.
This page can help with real questions. You can learn about your plan, your account, and what you pay each month. Small steps add up. You can save a lot over time.
Use the menu and the links to go from a big question to the facts that fit your own needs. Keep this page handy. Ask us if you get stuck.
We keep things short and clear so you can choose well. You can then read more if you want to. It only takes a few minutes. You are in the right place.
The links on this page help you weigh your choices. They also help you see what you pay and what to do next. You can save a lot over time.
Our goal is to help you spot the bills you pay each month. We also share smart ways to keep them low. Ask us if you get stuck. Read on to learn more.
Come back to this page when you have a new question. It will still be here to help with bills and savings. You are in the right place. It is free to read.
We link the small choices you make each day to the big picture. That means your budget and what you spend at home. We make it easy for you.
Each part of this page helps you see what you need. It may be help with a plan, your account, or a good read. Read on to learn more. Small steps add up.
Use what you learn here to plan your questions. Look at your choices, then take the next step when you are ready. It is free to read. Keep this page handy.
Our pages link to each other. That way, you can find more help and still keep track of what you came for. We are here to help. It only takes a few minutes.
This page makes it easy to find the key facts first. Then you can pick a plan or make a change with less stress. Small steps add up. You can save a lot over time.
Good facts help you see why a bill went up. They also show you what to check before you call or reply. Keep this page handy. Ask us if you get stuck.
This page puts the key facts in one place. It can help you talk with a company about your bills and how to save. It only takes a few minutes. You are in the right place.
Our other pages explain the words you see on a bill. They also help you weigh the pros and cons of each plan. You can save a lot over time. We make it easy for you.
Our tips focus on real choices you can make. Start with the basics, then read a more detailed guide if you need one. Ask us if you get stuck. Read on to learn more.
This page is one of many that we share. Together they cover home costs, the firms you pay, and how to get help. You are in the right place. It is free to read.
Take your time and read this page first. It helps you see your choices and find out what to read next. We make it easy for you. We are here to help. It only takes a few minutes.
We set this page up so you can compare and keep reading. You will not need to hunt for what you want. Read on to learn more. Small steps add up. You can save a lot over time.
Monthly bills come with rules, terms, and fine print. This page helps you find the parts that count for you. It is free to read. Keep this page handy. Ask us if you get stuck.
Our pages give you a clear view of what you pay each month. You can then pick the plan or guide you want. We are here to help. It only takes a few minutes.
Some of our guides cover the basics. Others go into detail on one company or one type of bill. Small steps add up. You can save a lot over time. We make it easy for you.
It pays to read first and act later. This page links you to the next guide if you want to learn more. Keep this page handy. Ask us if you get stuck.
We share guides that help you make sense of your bills. They show your choices and the best next step. It only takes a few minutes. You are in the right place.
Want more detail on a bill, a plan, or your account? Check this page against the links we share here. You can save a lot over time. We make it easy for you.
We group our pages by topic to keep things simple. This helps you stay on track as you read about your costs. Ask us if you get stuck. Read on to learn more.
A bit of background goes a long way. It helps you spot what counts before you check a bill, change a plan, or call us. You are in the right place. It is free to read.
This page is part of our help library. It gives you clear facts and links so you can keep on reading. We make it easy for you. We are here to help.
Your needs can change, so come back any time. Our other pages can help you look into a new cost or plan. Read on to learn more. Small steps add up. You can save a lot over time.
We laid out this page to help you get the facts and compare them. You can then choose your next step with ease. It is free to read. Keep this page handy.
A diploma and a first job kick off your financial adult life.
Whether you’re graduating from high school or college, a diploma and a job represent the beginning of your personal — and financial — adult life.
When you have the inevitable “I have no idea what I’m doing” freakout, remember these tips.
You probably can’t save, invest and pay off debt all at once, so prioritize in this order.
Identify your after-tax income on your pay stub, then use the 50/30/20 rule as a budgeting guideline.
If 50% isn’t enough to cover living expenses, dip into your nice-to-haves bucket.
Credit is adulthood’s currency.
Check your credit score to see where you stand.
In fact, credit-builder loans can help establish credit and save money at the same time.
You can get credit-builder loans through some credit unions, community banks or the online lender Self Lender.
Assuming you make full, on-time payments, you’ll get some positive credit history under your belt — and have cash on hand for that emergency fund or retirement account.
Speaking of retirement, saving for it is one of the best uses of your cash now.
We didn’t use age 72 by accident —.
If you don’t have an employer-sponsored retirement account, open a Roth IRA through a brokerage or robo-advisor and contribute up to $5,500 yearly.
Student loan payments typically come due six months after you leave school, giving you time to get a job before payments begin.
