In many cases, college graduation is the first step of your adult life — that’s why it’s important to start your journey off on the right foot.
“You’ll feel like you have zero time as a working adult, even more so than in college, so working on that understanding of basic financial concepts is a good place to start,” says Ian Bloom, financial planner and owner of Open World Financial Life Planning.
To kickstart your financial future, here are six financial practices to start after college graduation.
1. Build a budget and start saving
In order to build your budget, take the time to establish financial goals for yourself based on your salary, necessary spending and any money you’re allocating to ‘fun’ activities.
“Knowing what you want to achieve when and how much risk you’re willing to take are the key components to any financial plan,” says Rob Cavallaro, Chief Investment Officer at RobustWealth.
Create a budget for yourself that takes into account your savings goals, monthly payments (rent, utilities, car payments, student loans), weekly spending (gas, groceries, entertainment) and any other pertinent variables.
Mobile apps like Mint can help you get started. These programs track your spending by connecting to any accounts you have (checking and savings, credit cards, investing, etc.) and organizing your outgoings by category. Once you have a good idea of where you’re money is going, you can build a budget based on your needs.
2. Set aside time for your finances
Financial literacy doesn’t happen overnight. In order to develop good money habits, set aside time every month to review your finances.
“The simplest financial practice that I would recommend to any individual is to begin setting a personal appointment for themselves to review their financial activity,” says Kyle Goulard, financial planner and founder of Goulard Financial Planning.
Review your bank account and credit card statements each month to ensure your spending is in line with whatever budget you’ve set for yourself, along with any other accounts you save, spend and invest in.
You’ll also want to stay on top of your credit report to ensure your credit score isn’t being negatively affected by any of your financial habits.
Many credit cards, such as the Discover it® Cash Back, offer free credit score reporting. This card, in particular, provides a free update on your FICO® Credit Score on monthly statements, online or via Discover’s mobile app.
3. Prepare for student loan payments
Once you graduate from college, you’ll have a grace period (usually six months) in which you can prepare your finances before beginning student loan payments. If you prepare properly, there won’t be any surprises when it comes time to make your first payment.
According to a 2016 study out of Prudential Financial, 53 percent of current borrowers don’t know their future monthly repayments and 74 percent are unsure how long they will be making payments.
Joe DePaulo, CEO and co-founder of College Ave Student Loans, encourages getting to know your student loan provider, loan types and interest rates during your grace period in order to prevent any blunders and speed up the payment process.
“Pay attention to the interest rate on each loan,” says DePaulo. “When you can afford to pay a little extra, you’ll usually save the most money by paying down the loan with the highest interest rate first.”
DePaulo also suggests setting up automatic payments as soon as possible.
“You’ll often get a discount on your interest rate when you’re making automatic payments, and you’ll know that your payments are being made on time each month. It’s a great way to save money and build good credit,” says DePaulo.
4. Kick-start your retirement fund
The earlier you start saving for retirement, the better.
One of the easiest and most-recommended ways of doing so is by setting up a 401(k), whether it’s offered through your workplace or set up as a personal account through your bank or brokerage firm.
Many workplaces offer 401(k) matching, meaning your employer will contribute to your 401(k) up to a certain percentage or dollar amount. Cavallaro recommends maximizing your contributions as much as possible in these instances.
“This is essentially free money from your employer designed to encourage you to save. Make sure the contributions are properly aligned with your goals and monitored over time,” says Cavallaro.
Look into what retirement plans your employer offers and choose which best appeals to you. Then, try and funnel at least as much as your company will match into your plan of choice. If your workplace doesn’t offer matching, aim for 5 percent of each paycheck.
5. Switch from a student card
Do you own a student credit card? If so, now is the time to find a credit card with perks and rewards more relevant to your new lifestyle, like high cash back rates on eating out, travel expenses and streaming services.
If you like the issuer you’re currently with and have a good track record with them, upgrading your student card should be a simple process — your issuer may even reach out themselves.
For example, say you own the Citi Rewards+℠ Student Card and want to upgrade to a different card within the Citi suite, such as the Citi Rewards+℠ Card. To do so, simply contact a Citi representative online or over the phone to request the change.
6. Start investing
By investing a portion of your paycheck into individual stocks or mutual funds each month, you can slowly build up a portfolio.
Emmet Savage, CEO of MyWallSt, says the best financial practice he started after graduating was investing.
“The goal of starting to invest early is to take advantage of the one thing you can’t earn back — time,” says Savage. “Younger investors have time on their side, which means they can afford to invest in more high risk, high reward stocks.”
According to Savage, you can adjust your portfolio as you age — the most important part is getting started as soon as you can.
“Thinking about investing long-term will yield the most money at the age of retirement,” says Savage.