After graduating college, you enter a world of rent, loans, paychecks, and money management. It is more important than ever to have a keen understanding of your personal finances. A greater understanding will lead to a more fluid transition into the adult world. In a recent article found in Forbes, Mary Morrison, Director of Funds Management at Stanford University, provides a few tips to get you started:
1. Don’t Let Salary Be the Deciding Factor for your Career Choice
Salary, although important, must be considered from all angles. Evaluate your career goals before zeroing in on the dollar amount. Remember that $50,000 in Los Angeles can go a lot farther in a smaller city. Also take into consideration what is offered in terms of health insurance benefits, savings options, and overall perks.
2. Evaluate Up-Front Expenses
Moving to a new city is costly. Figure out how much money you will need before you make the move. Some companies issue the first paycheck up to 4 weeks after you begin and up-front expenses can include: an apartment rental deposit, rent, utilities, and overall moving costs.
3. Know Your Net Salary
Money will be deducted from your overall gross salary for items such as income taxes and insurance, leaving you with your net salary or “take-home pay.” Make sure that you know your net salary so that you can create an accurate budget.
4. Be Practical About Your Budget
When creating your budget, consider the essentials such as transportation, insurance, food, entertainment, and an emergency fund. Remain realistic about the costs; it’s often more than you think.
5. Know Your Paycheck Cycle
It is important to know when and how much you’ll be paid. This will help you to pay your bills in full and on time.
6. Create an Emergency Fund
Always be prepared for the unexpected. By setting money aside, you will be more prepared for whatever opportunity, illness, or misfortune comes your way.
7. Have a Credit Card and Debit Card
Credit cards are a great way to learn how to manage money and build your credit history. It is also more resistant to theft than a debit card. However, debit cards are good for common expenses such as meals out and gas. This will help you to avoid continuously swiping your credit card and unknowingly spending too much.
8. Set Up Your Savings
Begin to put money into a 401(k) or an IRA account. By setting aside a small part of your paycheck each month, your savings will build, and lead to a more comfortable financial situation later in life.
You are not too young to begin investing. Your savings account will always be affected by inflation but by investing in diversified options, the growth of invested money will be more likely to surpass inflation rates.