Making the transition from college to the professional world can be challenging. Not only are the two environments entirely different, but you are now also responsible for managing all of your personal finances yourself. While it’s exciting to have a consistent paycheck in your bank account, we have a few suggestions of things to avoid with your new income to ensure your financial well-being.
- Managing debt poorly
Whether you have too much debt — or too little — finding a balance can be challenging. Don’t be afraid of having some debt; this will help you to establish a credit history. But be mindful of consistently paying off your debt so that it doesn’t become overwhelming, or have a negative effect on your credit score.
- Putting off investing and saving
As you start your career, retirement probably isn’t on your mind…but it’s never too early to start preparing. As a starting point for saving, U.S. News suggests that you first establish an emergency fund with at least three months of expenses. It doesn’t need to be a large sum at first, but it’s a good practice to start with saving a small percentage of your monthly income to establish the savings habit. Then move on to saving for retirement. U.S. News adds, “If your employer offers any type of 401(k) matching program, take advantage of it — passing it up is like saying no to a pay increase.”
- Letting your lifestyle consume your income
After being in college and having little to no income, a steady paycheck from a full-time job is thrilling. But don’t let the sudden influx of income inflate the way you live! Learn to cook and take your lunches to work to avoid dining out every meal, every day. And consider spreading out your purchases of a new car, new furniture, and a new TV beyond your first month of living in your new digs.
- Failing to make a budget
Now that you have a steady income and expenses that need to be paid each month, it’s important to keep track of what money is coming in and where it is going. A budget will help keep you on track and know in which areas you need to decrease your spending, or if you have a little bit of wiggle room. Check out our blog article about building your first budget for some ideas on where to start.
At First Internet Bank, our mission is to help you manage your money more easily and to empower you to make smart financial choices. As always, call us toll free at 1-888-873-3424 if you have any questions.