On Managing Your Finances as a Young Professional

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Today’s guest post comes to us from Alvina Lopez. Alvina is a freelance writer and blog junkie, who blogs about accredited online colleges.

On Managing Your Finances as a Young Professional

Entering the real world can be a daunting experience, especially for the many college students these days who were given assistance from grants, loans, scholarships, and their parents. 

The truth is, we don’t fully appreciate the money in our bank accounts unless we’ve poured our own blood, sweat, and tears in to earning it. As responsible adults, it’s important that we manage it properly in order to avoid going broke, damaging our credit, and generally making life more difficult than it should be. Here are a few tips we’ve compiled that’ll help you get off to the right start financially:

Resist spending too much from the get-go

This one is certainly common sense, but you’d be surprised by the amount of young adults who go crazy after their first few paychecks. You can avoid that by composing a monthly finance sheet. Once you’re familiar with how much you’ll be earning after taxes, calculate how much you’ll be spending on bills — you’ll likely have rent, electric, water, internet, phone, student loans, car insurance, and hopefully not much else. Subtract those necessary expenses from your income after taxes and you’ll have your disposable income, which can be used for food, gas, clothes and entertainment. 

After a couple months of familiarizing yourself with your finances, you should know if you can afford to take on any additional payments. You don’t want to live month to month.

Save, save, save

Have some money left over after each month? Great, then you’re doing your job. However, don’t be tempted to splurge on items and services you don’t truly need. For example, you don’t need the premium cable channels. Don’t eat out each day. Bring your lunch to work. Set a limit to how much you spend on food each week, and only buy what you know you’ll eat from the store. Plan your car use and save on gas. The money you save can be used for more necessary stuff or put into savings. It’s always good to have cushion just in case unforeseeable circumstances — like car troubles or being laid off — affect your pocket book.

Enroll in online automatic bill-pay programs

The bills will add up now that you’re entirely on your own. Keeping track of all of those bills and when they’re due can be difficult given your other newfound responsibilities as an adult. Fortunately, you can save the hassle by enrolling in online automatic bill-pay programs on the websites of either your bank or the company you’re paying.  As a result, you won’t miss payments and you’ll build your credit, saving money in the long run.

Determine when the time is right to purchase a car

Living in a commuter city and still driving that hunk of metal and plastic your parents bought you for your 17th birthday? You may not have much of choice but to buy (or lease) a car. Of course, you should consider doing so only if you earn enough and spend modestly, otherwise you should consider public transportation and carpooling. 

Leasing can offer lower monthly payments, but you’ll be paying for a while until the lease is up. If you plan to buy, you should be prepared to provide a hefty down payment. Obviously, the process of buying (or leasing) is extremely complicated and requires a considerable commitment of time in order to get the best price possible. Here’s some a great advice about car buying from mint.com.

Enroll in a personal financial management service such as mint.com

Free of charge, the aforementioned Mint.com provides more than just financial advice, allowing users to track their bank and savings accounts, loans, credit cards, and spending habits. That information also helps them set goals and establish budgets. Even if you aren’t earning a lot of money and your financial situation isn’t overly complicated, it’s a great tool to have. You can never be too prepared on your new financial journey.

How about you all? What tips helped you get ahead on your finances after joining the real world after college? What didn’t work for you? 

Share your experiences by commenting below!

Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.

  • @ Resisting spending from the get-go
    • I am continuously amazed at how many people feel seemingly obligated to load up on a extra debt the minute that they have a real job. You think, “Hey, I’m making $60k, I gotta spend it somehow, right?”
    • But, you really can give yourself a head start on life by resisting the urge to buy a house, a new car, new furniture, and new sound equipment the first year out of undergrad. 
    • Another fact of life is that having more debt makes you less flexible in your life plans. Think about it, if in 2 years after starting working, you want to go back to graduate school, you won’t be able to afford to take that step if you are $100k in debt on cars, houses, etc. The same thing goes with if you were asked to move to be with someone you were wanting to marry. 
  • Two of the most important things I did coming out of college were 1) establish an emergency fund with 6-9 months of expenses in liquid, cash assets (high yield money market online savings account) and 2) set up and fully fund a Roth IRA each year. Do both of these things and you’ll be well on your way to financial freedom! 
  • @Mint.com – I have signed up for Mint.com, but have never really used it. For me, I have a very good idea about where I am financially each month that the budgeting interface Mint offers doesn’t add any value. 
    • How about you all? Do you use Mint.com? How does it work out for you?

***Photo courtesy of http://www.clevelandwomen.com/images/virginia-marti/03-26-08column/young-professional-women-2.jpg


  1. Jessica says:

    I do use Mint…I particularly like the visuals on the budget items (turns green to yellow to red as your approach your budget total for each category of expenditure) because towards the end of the month, it's a subconscious “nudge” to ease up if I'm getting too close to the limit. Of course, that's for things that are within my control, such as groceries/restaurants, entertainment, etc. It can also be motivating, when I see that I am underspending (in the green), I am encouraged to stay there and save the remainder!

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