There comes a time when you have to take charge of your financial health. For many young adults, that reality sets in soon after college graduation. After all, you're likely on a job or apartment hunt. Your student loans payments are set to begin and long-term life goals — like starting a family or buying a home — have moved up on your agenda. To get on the road to financial success, here are seven money moves recent college graduates shouldn't sit on.
1. Check your credit
Good credit saves you on everything from a mortgage to a car loan to insurance premiums, so don’t turn a blind eye toward those digits. Pull your credit reports for free from AnnualCreditReport.com and look into personal finance websites, like Credit Sesame, or credit cards that let you monitor your credit score monthly. To achieve solid credit, pay your bills on time, keep credit card balances low and check your credit reports regularly.
2. Set a student loan repayment plan
Most student loans have a grace period of six months after you graduate — and, if haven't found a job, you can defer repayments longer. But there are consequences for putting off that monthly expense. Namely, the interest continues to accumulate on the balance you're not paying down. Fortunately, when it comes to federal student loans, you have several repayment plan options. Assess your financial situation and long-term goals to choose the right one.
3. Start an emergency savings account
Money 101 says to bank away three to six months worth of expenses for a rainy day. Easier said than done, we know, but you can get there by opening a high-yield savings account, ideally at a separate financial institution from your checking account. That way, you'll have a harder time tapping the funds for non-emergencies. Auto-deposit some of each paycheck into this account or use these other easy ways to save more in five minutes or less.
4. Draft a budget
A personal finance app or simple spreadsheet can help you measure income against expenses. We've actually made a budgeting spreadsheet for you. Input your fixed costs (like your mortgage or rent), establish spending levels for “wants," set savings goals and tweak as necessary.
5. Look into life insurance
Yes, we know: No one wants to think about life insurance, something that only gets used if and when you die. But if you've already started a family or plan on having one down the line, now is the time to buy a policy. Life insurance rates go up alongside your age and the development of any health conditions, so a good rule of thumb is to apply when you're young and healthy. (We can help you easily compare life insurance quotes.)
6. Start saving for retirement
New research from Charles Schwab found young adults are unrealistically optimistic about their long-term financial success. Sad we know, but consider the study a reminder to start planning now — i.e. you're not too young to start saving for retirement. Put a portion of your paycheck into an employer-sponsored 401(k). Aim to contribute at least as much as your employer matches. Otherwise, you’re leaving money on the table. Boost your nest egg by opening a traditional or Roth individual retirement account.
7. Avoid debt
If you need to take out a loan — say, you want to buy a car to commute to work — make sure you can handle the monthly payments. (Read: Live within your means.) And resist the urge to rack up credit card debt for non-essentials. Nothing kills a fledgling budget like annual percentage rates.
Genius tip: Avoiding debt and eschewing credit cards is not the same thing. In fact, a credit card is useful when it comes to building credit. Just don't carry a balance in an effort to do so. It's completely unnecessary — you can achieve a good score by simply paying those bills on time.
If you already have a lot of credit card debt, don't panic. There are ways to pay your balances back faster.