I graduated from high school. Now what?
Congratulations on graduating from high school! As you embark on your post-high school journey, focusing on building good financial habits now can set you up for success later in life. Here are ten things to consider:
- Create a budget, and stick to it! Any money you receive from parents, as gifts, or from a job is considered income. Track your expenses. You may even want to categorize your spending so you can get a better idea of what you spend the most on. Identify needs and wants, and decide how much you're willing to spend on each (hint - needs should be a higher priority!). Consider using a budgeting app to help you stay more organized - your bank may even have one you can use. And remember, you can always adjust your budget based on your changing lifestyle and needs.
- Open a bank account if you haven't already. Set up checking and saving accounts. If you qualify, your bank may offer a student account with special added perks.
- Start an emergency fund, which should have 3-6 months of funds to maintain your normal living expenses. It's helpful to keep this emergency fund in a separate savings account if you have access to one. This money can be used for unexpected expenses, like a job loss, car or home repair, or medical emergencies.
- Understand and manage debt. When considering student loans, look at the details like interest rate, payment options, and when payments are required to begin. Decide how much debt you're comfortable having, and try to avoid consumer debt (like credit cards) unless you fully understand the risks and benefits.
- Build good credit responsibly. Good credit is important for certain jobs, getting loans for homes and/or cars, or renting a place to live. If you have a family member you trust, who has good credit history, you may be added as an authorized user and benefit from their credit. You may also consider getting a credit card. We recommend a secured credit card, which requires a deposit, and acts as your credit limit. This is a great way to begin good spending habits and honor your budget. If needed, taking out a small loan and staying on top of your payments can also help build your credit. Always pay your bills on time, and do everything you can to keep your spending amount smaller than your available funds.
- Consider investing - even if only a small amount. If you start working at a company with a retirement plan, like a 401k, start investing as soon as you can. The earlier you can start, the more time you can potentially build interest and grow your account. If you don't have access to a 401k, you can look into an IRA, some of which have low initial investment requirements. When starting a retirement account, we recommend discussing options with a trusted family member or a investment advisor representative, like us.
- Understand taxes. When you start a job, you'll have to fill out tax forms. Ensuring you fill these out correctly can save you headaches down the road. Equally important (and potentially equally confusing) are your tax returns. If you need a referral for a CPA, please contact us and we will be happy to connect you with one we trust in your area.
- While you hopefully won't ever have to use it, paying for insurance is worth the protection. Renters insurance, health insurance, and auto insurance are three that we recommend (and auto insurance is required by law, so definitely don't skip that one). Insurance is nuanced, so again, working with an agent or someone with knowledge about insurance that you trust is a good idea.
- Set financial goals, and write them down. Short-term, mid-term, and long-term goals are all important to have in mind. Examples of each are:
- short-term: what do you hope to achieve in the next 1-3 years? Possible goals are saving for a car down payment, saving for a trip, or to pay off a small debt.
- mid-term: these are goals for the next 3-5 years, and may include starting your own business, buying your first home, or graduating from college without student loan debt.
- long-term: where do you see yourself in 10, 15, 30 years? These are your long-term goals, and may even be as long-term as how much you'd like to have saved for retirement. It's never too early to set these goals, but remember it's okay to adjust them as you go.
- Keep learning. Attend financial planning seminars, work with an advisor, read more about the market and good money management. Talk with people who know more than you or who have different goals or philosophies than you. There is always more to learn, especially as you are just starting out.
If you'd like to talk with an investment advisor about your goals, please call or email us. We offer complimentary consultations to help you get started on the right track.
