So, you are graduating and now have to be an adult!  Now what? How do you get yourself started on the right path with your personal finances?  These basic principles can be followed by anyone no matter where you are on the life journey. 

If you are just entering the full-time working world after graduating college or high school, now is the time to lay the foundation to set yourself up for a solid future.  Habits build so if you take the time to think about what matters to you and to invest in yourself, you will have a bright future.

If you are fortunate to have a job with employee benefits, get into the retirement plan as soon as you are eligible!  Many employers do a company match meaning they will contribute some percentage or dollar amount to your account.  This is free money!  Find out what the company matching policy is and work your way up to maxing that out.   It’s OK to start small with one or two percent of your pay.  The earlier you start the better because you will get the huge benefits of compounding interest.  You can “set it and forget it” and know that you are building your nest egg without worrying about it.  

If you do not have company benefits that offer a retirement savings plan, you can open an IRA and brokerage account on your own.   This can be done online, and you can fund it with regularly scheduled automatic deposits, or you can fund it yourself on a regular basis.  There are big differences between Roth IRAs and traditional IRAs and at this point in time with the tax laws in place, you almost always want to contribute to a Roth IRA.  Monies deposited to a Roth IRA are taken after tax and the big benefit is you pay the tax now on the deposited amount, but it can now grow for years and years tax free!  This is the big benefit of Roth IRAs because years down the road when you take the money out, you pay zero taxes!  Additionally, all that growth you earned with the interest is all tax free! That is called tax free growth and will really allow your money to grow quickly with no tax issues later when you take it out. There are legal limits on who can contribute to a Roth IRA, and the maximum allowed amount changes each year so you should  stay on top of what that is and max out your Roth contributions.  Companies like Fidelity have online set ups that are straightforward to follow and set up.  

In conjunction with setting up some kind of retirement fund, you want to create an emergency fund with money you can access quickly in the case of an emergency.  This would be a savings account, and you can also shop around online for the best interest rates.  There are many online banks where you can set up accounts in minutes and then can set up automatic deposits.  You can start small with something like $20 a paycheck and set it and forget it.  Let this fund grow and only tap into it if you have a true emergency.  Going out to eat or going on a vacation would not be considered an emergency!  You want to have this savings cushion there to help you navigate life when things like unexpected car repairs pop up or other unexpected events.  The longer-term goal is to be able to build up to three months of expenses in case of job loss or something catastrophic.  If you could be unemployed for three months and have the ability to pay for all your monthly expenses, including housing, you will be in a decent position to not go into debt while you seek another job.

One area that can become a very slippery slope is the use of credit cards!  Credit cards can create a serious problem if they are mishandled so this requires you to truly know your values and think like a mature adult. In today’s world everything seems to revolve around your credit score and the only way to get a credit score is to have debt.  It’s really a score on how well you manage your debt.  This score is calculated by the finance industry and is based on your income and how much debt you have and how well you do with paying it down and reusing it.  If you never had a credit card and never had any kind of loan with a bank, you will literally have a zero-credit score.  This can be an issue when you are looking for an apartment or loan for a car or home since the first thing, they look at is your credit score.  The easiest way to start to build a credit score is to get a basic credit card with a low starting credit limit.  These can be obtained online easily, and many young people are targeted because the credit card companies want your business.  The use of credit cards requires a mature mindset and knowing what your money values are.  Credit cards become a huge problem when they are used without thinking to acquire things you really cannot afford.  Thinking that you can have it now and worry about paying for it later is never a good plan because when later usually comes, you have other things you have to pay for.   A responsible way to build credit is to get a starter credit card and then use it for set expenses each month.  Things like your cell phone, or streaming subscriptions are a good way to use it.  You can use your credit card to pay for those and then as soon as your credit card is due, you pay it off.   Never let it start accruing interest!   You can build on this and use the credit card as a vehicle to build your credit in a safe and manageable way.  There are all kinds of credit cards out there with rewards so research these carefully and find one that meets your needs.

Starting off on your financial success journey doesn’t have to be all work and no fun.  There are plenty of opportunities to have fun as you build for your future.  Think about what you’d like to be doing in the next few years and make a plan to get there.  If you want to buy a car, make a plan on how you can achieve that.  If you want to start a side hustle business, start looking into it and networking with those who have done it and make a plan.  With a plan, you can begin the financial steps to get you on that path.  A good way to fund your dreams is with savings accounts.  If you want to take a trip, research what it will cost and then set up a dedicated savings account where you contribute towards this goal with each paycheck or each month.  You can watch that account grow and think about how amazing it is going to be to experience whatever your fun goal is without worrying about how to pay for it.   As an older adult I have about eight savings accounts with monies funneling into them for vet bills, car repairs, car insurance, etc.  When my youngest was born, I set up a Disney fund and our goal was to go when she was three years old.  Those three years flew by and when it came time to book our trip, we had plenty to cover everything.  We got to enjoy that trip and not have to worry about getting a big credit card bill or taking months to dig out from having some fun.

The sky is the limit and only you can decide how you want to use your money.   It takes discipline and knowing what your goals and values are.  If you continue to think about the future and what you want to be doing, you can set yourself up for success.  You do not have to be “rich” to become rich.  Little things add up and you will be amazed by what you can achieve.