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Starting your first postgraduate job? See how to organize your finances
NEW YORK (AP) — With graduation season over, many college graduates are embarking on summer internships or their first full-time jobs. Navigating your finances as you enter adulthood can be challenging, from understanding your health insurance and benefits to managing a budget.
Looking for a job It’s usually the first hurdle, so if you’ve accomplished this, take a moment to be proud of yourself.
“Once you get your first job, pat yourself on the back,” said Nick Holeman, director of financial planning at Betterment, a financial advisory firm.
So it’s time to think about your financial future. With Credit card defaults are on the rise It is interest rates still highIt’s more important than ever for recent graduates to start their adult lives on the right financial path.
Here are expert recommendations on how to do this:
Pay attention to the integration instructions
Landing your first job is exciting, but the onboarding process can feel overwhelming. When you start a new job, most companies offer guidance on benefits like 401(k) and health insurance. It’s a lot of information, but it’s important not to ignore it, Holeman said.
One important thing to focus on is your employer-sponsored retirement plan. Although many companies auto-subscribe you, Holeman recommends you save more than the typical 2% to 3%. Auto-enrollment allows your employer to take a set amount from your paycheck to allocate to a retirement investment account. You can choose to cancel or increase the amount of your contribution.
“Just because you’re automatically enrolled doesn’t mean you can’t come in and increase how much you’re contributing,” he said. “And this is a great way to build automatic savings habits that will carry you through the rest of your career.”
Discover your health insurance
This article is part of AP’s Be Well coverage, focusing on wellness, fitness, diet and mental health. Read more Be well.
Some recent graduates may remain on their parents’ health insurance, while others may enroll in their employer’s health insurance plan. But if your job doesn’t offer health insurance, experts recommend you sign up for Affordable Care Act.
“You shouldn’t be without insurance if you go to work for an employer that doesn’t offer health insurance,” said Louise Norris, health policy analyst at healthinsurance.org.
When navigating the ACA market, you should consider your budget, health, and availability of doctors in your area. If your employer offers multiple health plans, Norris recommends knowing the details of the plans, such as deductibles, copays and usage policies.
If you are generally healthy and don’t go to the doctor often, Holeman recommends that you choose a high-deductible health plan because it will allow you to save money on a health savings account, also known as HSA. An HSA allows you to set aside pre-tax money to pay for medical expenses, which can help you cut out-of-pocket costs when visiting the doctor.
Save for emergencies
It’s difficult to prepare for emergencies because you never know when they will happen and how expensive they will be. However, it is good practice to have an emergency fund that will alleviate some of the financial burden if something goes wrong.
“Think of your emergency fund as a ‘break glass in case of emergency,’” said Holeman, who recommended that you keep your emergency savings in a separate bank account.
Emergency fund amounts vary depending on each person’s circumstances, but Holeman recommends that you save three to six months of expenses. This is an ideal scenario, but any amount of savings can come in handy in an emergency.
Manage your credit card usage
Credit cards can help you build your credit score and develop good borrowing habits, but if not used carefully, they can also lead to a lot of debt.
If you’re getting your first credit card, Holeman recommends that you choose something you can keep for a long time, as an important factor in your credit score is the length of your credit history. Holeman recommends that your first credit card be one that has no annual fee and is easy to maintain.
If you’ve had a credit card before, remember that to maintain a good credit score and not get into credit card debt, you must pay your balance on time every month. It’s better to use your credit card to pay for things you can already afford, recommended Steve Pilloff, associate professor of finance at George Mason University.
“Use it as a way to make payments rather than borrow money. Focus on the card, not the credit,” Pilloff said.
Adjust your budget
Budget is a key component of your financial life, whether you’re trying to save for your emergency fund or pay off debt.
Budgets change along with your finances, so when you land your first full-time position and perhaps move to a new city, you need to change your budget to reflect your current financial reality, Pilloff said.
If you’re using your budget to find ways to cut costs, Holeman recommends focusing on big expenses, as rent or transportation costs, rather than small expenses like coffee or groceries. If you have debt, Holeman also recommends focusing on paying off high-interest debt first. If you don’t have debt, focusing on building an emergency fund and saving for short-term goals is also a great place to start setting goals for yourself.
Budgeting is not a one-size-fits-all process. To achieve your financial goals, you need to continually evaluate and adjust, Pilloff said.
With apps like YNAB It is Every dollar, you can easily access and modify your budget at any time. However, the best way to stick to a budget is to find the format that works best for you, whether it’s an Excel spreadsheet or a notebook.
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