It’s time again for new graduates to toss their caps high aloft, celebrate – and get down to the business of working and earning an income. Many grads have secured entry-level positions and are launching their careers. Others are still in the hunt and will land that first job soon. Next up: Getting the first paycheck. Most likely, that check will seem like a large amount of money but will disappear all too soon unless they are prepared.

If you have a new graduate in your life, here are some of the key things to share with them so that they can make the most of their finances, now and in the future.

1.     Be prudent when anticipating income. Help new grads prepare themselves with realistic expectations. Many graduates’ salaries will not live up to their expectations right away. Before committing to any expenditure, such as a car payment or apartment lease, it’s best to have a signed job contract and, ideally, that first paycheck already in hand.

2.     Start budgeting. Contrary to popular belief, a budget is not a restrictive tool. Rather, it’s intended to be a spending plan to help you make sure your money goes where you want it to go. Deciding on where you want it to go – your goals – is the first, and often, most challenging step. Most new grads will have a mix of short-term and long-term goals that could include anything from making sure they have time for a favorite sport or hobby to buying a car or house. 

Build the budget around those goals, knowing things will likely change. Any budgeting system works. New grads should keep it simple and employ whatever they prefer and will use on a regular basis. That might be an app or online program, a spreadsheet, or just pencil and paper. As they start to track expenses, they’ll start to see more specific categories to include in the budget, where their money goes and where they can make changes to get to their goals faster.

3.     Develop a habit – of saving. Some experts recommend saving 10% of net income; many recommend as much as 20-30%. The fundamental point is to choose a percent, whatever it is, and make it consistent. Designate part of this savings to an emergency fund, and plan to build that fund over time so that the funds in it could cover at least six to nine months of base living expenses. However, most young adults will find that even a few hundred dollars will go a long way toward the inevitable unexpected expense.

4.     Save for retirement. When just starting out, retirement is likely the furthest thing from a new grad’s mind. But helping a new grad see the impact of even modest, regular savings contributions with an online compound-interest calculator can go a long way in helping them understand the benefits. And if the grad is fortunate enough to work for an employer that matches contributions in a company-sponsored plan, help them understand that not contributing the maximum is like giving money away.  

5.     Always pay on time. Paying every bill on time is a simple step that will help build solid credit scores over time, and avoid expensive interest and fees. New grads can set up simple systems – whether online or off – to make sure they pay every bill by the due date.

6.     Learn to responsibly use credit. Established, and positive, credit history can pay off in spades over the course of a lifetime. It can help in obtaining loans and getting the best interest rates (such as for a vehicle or a mortgage), renting an apartment, securing the best vehicle insurance rates, and sometimes even getting a job.  

Most adults need just one credit card to manage personal business and build credit profiles (debit cards do not help build a credit history). Cards offering plenty of rewards and no annual fee are available. Once a card is in hand, it’s crucial to charge no more than you can pay off in full and on time each billing cycle.

7.     Check in regularly. Monitoring progress will up the chances of achieving goals, whether those goals are related to fitness, healthy eating, career planning or finances. Review budgets, savings and assets often. Check bank and credit card accounts online to watch for any unexpected or fraudulent activity. Each month, take time to reconcile accounts and know exactly where things stand.

Managing finances can be challenging, but it also can be rewarding. By getting started on the right foot, a new graduate can get, and stay, on the road to a healthy financial future.

The blog articles published by Unlock Technologies are available for informational purposes only and not considered legal or financial advice on any subject matter. The blogs should not be used as a substitute for legal or financial advice from a licensed attorney or financial professional. Links in our blog posts to third-party websites are provided as a convenience and are for informational purposes only; they do not constitute an endorsement of any products, services or opinions of the corporation, organization or individual. Unlock Technologies bears no responsibility for the accuracy, legality, or content of external sites or that of subsequent links.