Starting your first job after graduation? Here’s how to organize your finances

Now that college graduation season is over in the United States, many students who have completed their studies are embarking on summer internships or their first full-time jobs. Managing your finances as you enter adulthood can be difficult, from understanding your health insurance and benefits to managing a budget.

Finding a job is often the first challenge, so if you’ve succeeded, take a moment to feel proud of yourself.

“Once you land that first job, give yourself a pat on the back.“, said Nick Holemandirector of financial planning at Bettermenta financial advisory firm.

And then it’s time to think about your financial future. At a time when credit card delinquencies are on the rise and interest rates are still high, it’s more important than ever for recent graduates to start their adult lives on the right financial path.

Here are some expert recommendations on how to do it:

Pay attention to the instructions for joining the organization

Landing 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, she said. Holeman.

A key aspect to focus on is your employer-sponsored retirement plan. While many companies automatically enroll you, Holeman recommends that you save more than the usual 2% to 3%. Automatic enrollment allows your employer to take a set amount from your paycheck and put it into a retirement investment account. You can opt out of that plan or increase the amount you contribute.

“Just because you’re automatically enrolled doesn’t mean you can’t log in and increase how much you contribute.“, he explained. “And that’s a great way to develop those automatic savings habits that will carry you throughout the rest of your professional life.”.

Calculate your health insurance

Some recent graduates might stay on their parents’ health insurance, while others might enroll in an employer’s health insurance plan. But if your job doesn’t offer health insurance, experts recommend enrolling in President Barack Obama’s public health care law (ACA).

“You should not be left without insurance if you are going to work for an employer that does not offer health insurance.“We’re not going to be able to afford to pay for health insurance,” said Louise Norris, a health policy analyst at healthinsurance.org, an independent guide to choosing health insurance.

While examining the options in the market for the HEREyou should consider your budget, your 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 their deductible, co-pays and usage policy.

If you are generally healthy and do not go to the doctor often, Holeman suggests choosing a health plan with a high deductible — which means it costs less — because that will allow you to put money away in a health savings account (HSA). An HSA lets you set aside money on a pre-tax basis to cover medical expenses, which can help reduce your out-of-pocket costs when you visit a doctor.

Save for emergencies

It’s hard to prepare for emergencies because you never know when they’ll happen or how costly they’ll be. However, it’s good practice to have an emergency fund that will ease some of the financial burden if something goes wrong.

“Think of your emergency fund as a ‘break glass in case of emergency’“, said Holemanwho recommended that you keep those savings in a separate bank account.

Emergency fund amounts vary depending on each person’s circumstances, but Holeman recommends that you keep three to six months’ worth of your expenses there. This is an ideal scenario, but any amount of savings can come in handy in case of an emergency.

Manage your credit card usage

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 put you in deep debt.

If you are applying for your first credit card, Holeman recommends choosing one you’ll be happy to keep for a long time, since a big factor in your score is the length of your credit history. He also recommends that your first credit card be one that doesn’t have an annual fee and is easy to maintain.

But if you’ve already had a credit card, remember that to maintain a good credit score and avoid getting into debt with it, you must pay off your balance on time each month. It’s better to use your credit card to pay for things you can already afford, he recommended. Steve Pilloffassociate professor of finance at George Mason University’s Costello School of Business.

“Use it as a way to make payments rather than a way to borrow money. Focus on the card, not the credit.“, he added. Pilloff.

Adjust your budget

Budgeting is a key component of your financial life, whether you’re trying to pay off debt or save for your emergency fund.

Budgets change along with your finances, so when you land that first full-time job and perhaps move to a new city, you’ll need to change your budget to reflect your current financial reality, she explained. Pilloff.

If you use your budget to find ways to cut costs, Holeman She recommends that you focus on big expenses, such as rent or transportation, rather than small ones, such as coffee or groceries. If you have debt, she also advises that you focus 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 your goals.

Budgeting isn’t a one-time process. To achieve your financial goals, you need to continually evaluate and adjust it, she said. Pilloff.

With apps like YNAB and EveryDollaryou can access and easily 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 document or a notebook.