We are approaching graduation season, and with that comes a new crop of freshly minted college grads entering the real world to take on their first jobs within their chosen career fields. This transition to "adulting" brings the financial responsibilities of being entirely on your own. As you begin your career, juggling the financial independence of debt, income, new expenses, risk management, and investments may be daunting. It begins, however, with a careful examination of your new situation. 

Start With a Realistic Post-Grad Budget 

To get a clear picture, build a budget by listing all your latest expenses. There are plenty of budgeting templates in Excel or online. Find one that works for you and begin honestly listing your necessary expenses (student loan repayment, credit card payment, car payment, taxes, rent, utilities, food, insurance, health, and clothing).  

Next, list your desired expenses (entertainment, travel, savings goals, investing, additional debt paydown, personal development, pets, and subscriptions). Hopefully, you will have after-tax income that will cover all of these expenses and generate excess savings. Use a basic rule of 50/30/20 – 50% to necessary expenses, 30% to wants and entertainment, and 20% to savings and debt payoff beyond minimums.  

Prioritize Saving, Investing, and Paying Off Debt 

If you have excess above these monthly expenses, we recommend the following prioritization for the rest of your funds: 

1. Contribute at least the amount to your 401(k) to attain the match from your employer. Note: because you are young and just starting, consider enrolling in the after-tax ROTH 401(k) for your contributions. This makes growth and distributions tax free later in life.
2. Consider funding a health savings account (HSA) up to the maximum annual amount.
3. Build an emergency fund with 6 months of your basic needs first in a bank or money market account (not stocks!). It may be necessary to save more to this bucket if you have short-term goals (house down payment, car, engagement ring, etc.). 
4. After the emergency fund is funded, try to tackle any debt above and beyond the minimum payment.
5. After the debt is paid off, consider maximizing 401(k) employee contributions.
6. After maximizing employee contributions, consider contributing to an outside IRA/Roth IRA and taxable investment accounts.

Other Considerations 

Beyond saving and investing, there are a few other important personal financial items to think about:  

1. Consider enrolling in long-term disability insurance through your employer, or find one personally if not offered. This will protect your earning power should you not be able to work due to disability. Statistically, you are three to four times more likely to have a disability event in your working career than you are to have a premature death. 
2. Enroll in your company’s health plan or find a plan through the Affordable Care Act that suits your needs.
3. Protect yourself from liability: Get renters insurance on your valuables and general liability insurance should someone sue you. If you own a home, consider adding a personal umbrella policy to your homeowners’ insurance policy for additional coverage.
4. Get a credit card if you don’t have one and help establish your credit score. Pay it off in full each month, and do not carry a balance unless you absolutely need to. 

Obviously, everyone’s situation will be different. These are just some ideas to help you prioritize things and focus on things in your life that you can control. While there are certainly other priorities along the way, this roadmap offers a great starting point as you work toward long-term financial independence. Start where you are, stay consistent, and know that each small move adds up over time.  

IMPORTANT DISCLOSURE INFORMATION