NEW YORK — Now that graduation season is over, many graduates are starting a summer internship or their first full-time job. Navigating your finances as you enter adulthood can be challenging, from understanding your health insurance and benefits to managing a budget.
Find a job is often the first hurdle, so when you get there, take a moment to be proud of yourself.
“Once you get that first job, give yourself a pat on the back,” says Nick Holeman, director of financial planning at Betterment, a financial advisory firm.
Then it’s time to think about your financial future. Of The number of late payments on credit cards is increasing And interest rates still highit’s more important than ever for recent graduates to start their adult lives on the right foot financially.
Here are expert recommendations on how to do that:
Getting your first job is exciting, but the onboarding process can be overwhelming. When you start a new job, most companies offer guidance on benefits such as your 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. While many companies register automatically u, Holeman advises you to save more than the usual 2% to 3%. Auto-enrollment allows your employer to deduct a fixed amount from your paycheck to allocate to a retirement investment account. You can choose to opt out or increase the amount you contribute.
“Just because you’re automatically enrolled doesn’t mean you can’t participate and increase the amount you contribute,” he said. “And that’s a great way to build those automatic savings habits that will take you all the time. rest of your career.”
Some new graduates may remain on their parents’ health insurance, while others may enroll in their employer’s health insurance. But if your job doesn’t offer health insurance, experts recommend signing up for health insurance Affordable Care Act.
“You shouldn’t be left uninsured if you go to work for an employer that doesn’t offer health insurance,” says Louise Norris, health policy analyst for healthinsurance.org.
As you navigate the ACA market, consider your budget, health, and the availability of doctors in your area. If your employer offers multiple health insurance plans, Norris recommends learning the details of the plans, such as your deductible, co-pays and utilization policies.
If you are generally healthy and don’t visit the doctor often, Holeman recommends opting for a health insurance policy with a high deductible, as it can save you money on a health savings account, also known as an HSA. An HSA allows you to set aside pre-tax money to pay for medical expenses, saving you out-of-pocket costs when you visit the doctor.
Emergencies are difficult to prepare for 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,’” says Holeman, who recommends keeping your emergency savings in a separate bank account.
Emergency fund amounts vary depending on each person’s circumstances, but Holeman recommends saving three to six months’ worth of expenses. This is an ideal scenario, but any amount of savings can be helpful in the event of an emergency.
Credit cards can help you build your credit score and develop good borrowing habits, but if you don’t use them carefully, they can also land you in a lot of debt.
If you’re taking out your first credit card, Holeman recommends choosing something you can keep for a long time, as this is an important factor in closing your credit card. your credit score is the length of your credit history. Holeman recommends that your first credit card be one that has no annual fees and is easy to maintain.
If you’ve had a credit card before, remember that to maintain a good credit score and not fall into credit card debt, you must pay off your balance on time every month. It’s best if you 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 a way to borrow money. Focus on the card and not the credit,” Pilloff said.
Budgeting is an important part 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 as you get that first full-time job and perhaps move to a new city, you’ll need to adjust your budget to your current financial reality, Pilloff said.
If you’re using your budget to find ways to cut costs, Holeman recommends focusing on big expenses. such as rent or transportation costs, instead of small costs such as coffee or shopping. 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-time process. To achieve your financial goals, you must continually evaluate and adjust, says Pilloff.
With apps like YNAB And Every dollar, you can consult and easily change your budget at any time. The best way to stick to a budget is to find the format that suits you best, whether that’s an Excel worksheet or a notebook.
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