If you’re among the young adults who have just graduated from college and landed their first job, you’re probably excited about being on your own for the first time. Visions of the places you’ll go, the people you’ll meet, and the things you’ll buy are dancing in your head. Not so fast. First, take time to create a financial plan. Yoli Marie, author of Financial Fitness for Young Adults (Financial Fitness Media; $17.99), is on a mission to help young people get their financesin order. In her book she offers key pieces of advice to young people on how to get financially fit:
Take stock of your financial situation. Congratulations; you’ve gotten your first paycheck from your first “real” job with benefits. Before you start spending that money, make sure your spending is below what you can afford. Don’t attempt to live a lifestyle like your parents right out of school. You might be eyeing that 4-bedroom house with a fireplace in every room and a pool in the backyard, but is it practical? If you’re living by yourself, it’s safe to assume you can scale back on the number of bedrooms.
On the other hand, if you find yourself unemployed or underemployed and wondering how you’re going to pay your student loans, consider staying home with mom and dad for a few more years until you’re on solid financial footing. In addition, contact your lender and ask for an economic hardship deferment or forbearance. Your payments would temporarily be placed on hold. You could also consider requesting an extended repayment plan, which would stretch out your payments and make them lower. However, be aware that you would end up paying more interest in the long run. Financial aid Website FinAid has additional information on repayment options.
Create a spending plan. Know where each of your dollars is going. Don’t think of a budget as a restrictive list of things you can’t buy, but a wealth plan that will help you reach your goals. Once you start your new job, make sure that some of your paycheck goes toward a retirement plan such as a 401(k) or 403(b). If your employer offers a match, contribute at least enough to get the match. It’s free money. Start contributing to that plan as soon as you’re eligible. There are many retirement calculators on the Web that can help you decide how much you should be putting aside.
Don’t neglect insurance. Insurance will save you a lifetime of trouble. If you’re renting an apartment, get renter’s insurance. If, for instance, your lap top is stolen from your apartment, renter’s insurance would cover the cost of purchasing a new one. And don’t forget short- and long-term disability insurance. This will replace most of your income in the event that you are injured and cannot work.
You can find more tips in Yoli Marie’s new book, Financial Fitness for Young Adults.
Sheiresa Ngo is the consumer affairs editor at Black Enterprise.