Photo: GFialkowski (Shutterstock)
For years you’ve lived on a college budget, scrounging meals where you can, buying gas on a trip-by-trip basis, and never once pondering the term “401(k).” Getting that first paycheck from your employer is going to feel like more money than you know what to do with. But before you start daydreaming about fancy cars and beach vacations, make sure you have your longterm ducks in a row with these ten financial tips.
Know your worth in salary negotiations
Negotiating your first salary is difficult , but you’re not without leverage. Use resources at your disposal, such as your college’s career center and other recent college graduates in your industry, to assess if the offer you’ve been made is sufficient market value. Otherwise, you certainly don’t need to take the first offer that comes along.
Be realistic about moving out
After experiencing four years of freedom, you’re probably not jonesing to move back in with your parents. But if this is an option, it’s worth considering, especially if you’re among those saddled with significant debt. Saving on monthly rent payments lets you save money and pay down loans at an more impressive speed. Besides, you’re going to want a nest egg before you take on signing a lease .
Match your company’s 401 (k) contribution
When you get a job, you will have to decide what percent of your salary you want to contribute to your 401(k) retirement plan . Your employer will most likely offer to match however much you’re contributing up to a specific percent; you want to make sure you’re contributing at least that amount. If they offer up to 3%, contribute at least 3%. To do anything else would be leaving money on the table, and that money’s interest will compound significantly over time to set you up for retirement.
Open a Roth IRA
I know these terms all sound scary and confusing, but they’re not. A Roth IRA is just an account that you can contribute up to $6,000 per year to invest and not have to pay taxes on the gains when you withdraw it in retirement. Put the full $6,000 in every year if you can, and invest in low-risk, longterm investments.
Do your due diligence regarding health insurance
If it’s an option for you, stay on your parents’ health insurance as long as possible. If not, really consider which of the plans your employer is offering is right for you. For instance, you might not need the most expensive option if you don’t foresee needing a low deductible. And if you don’t know what that means, here’s a good place to start.
Build a credit score
Your credit score matters because you will, ideally, one day make a purchase where you’ll need to take out a loan. Building good credit isn’t difficult, it can just take a while. You can build your credit score by making payments on time on a low-limit, secured credit card, paying your utilities, and even reporting your rent (if you have a rent payment). Start early, and thank yourself later.
Create a budget
It’s scary at first, but it’s important to know how much money you’re spending, and on what. Many like the 50/30/20 rule : Spend 50% on needs (like rent, groceries, and minimum loan payments), spend 30% on splurges (like trips, takeout, and concert tickets), and spend 20% on savings and extra payments on high-interest debt.
Understand your student loans
Once you’ve graduated, you typically have a six-month grace period before you need to start paying back those student loans. Sit down and figure out how much you have in federal loans vs. private loans, compare the interest rates, and make a plan of action for how to best pay these off.
Buying a car
Unfortunately, due to inflation , now is not a great time to buy new or used cars. If you think you can get by without one, that might be the right call. But if having a car is non-negotiable, just remember you’re going to need to factor into your budget reoccurring line items, such as car insurance, gas, and frequent vehicle maintenance.
Earmark some money for fun
Saving money is great, and it’s important for your future. But it’s important to build a little “fun money” into your budget. Find little ways to splurge by buying those concert tickets, or going to that trendy restaurant—just don’t go into more debt to do it.