Your college days are over and your collared days have begun. Congrats on your first job! Welcome to Austin rush-hour traffic!
When should you start saving and where should your “new” money go? Sorry, it is time to be an adult about your finances.
Here are the basic rules about just starting out:
Step 1. STOP USING CREDIT CARDS.
Remember, if you can’t pay cash for something, you can’t afford it. Have one credit card for travel or renting a car and keep it in the drawer in your nightstand. Keep it out of reach and unavailable when you see that little black dress at the Arboretum you simply must have or that new drill set at Home Depot.
Having a credit card does not mean you have money. It means that you have the ability to borrow money from a big, multinational bank at 22.5% interest. Good for you!
Step 2: BUILD AN EMERGENCY FUND.
If you crash on MoPac tomorrow morning, how are you going to pay the $1,000 deductible? If you thought of your credit card, think again. Using a credit card will only increase your debt and make your financial hole bigger and deeper.
Wouldn’t it be great if you had a few thousand dollars saved in an account just for emergencies? Such as unexpected unemployment, medical bills, car maintenance or a flooded apartment? Emergencies will happen, so why not plan for them?
Start by saving $1,000. Then over time, build it up to 3 months’ worth of living expenses so you won’t go back deep into debt during unexpected emergency.
Step 3. GET A HANDLE ON YOUR DEBT.
Write down each debt (any monthly payment), along with the minimum due, interest you are paying and total balance. On all your cards, but one, pay the minimum payment each month. Then focus all your energy and finances on that one card. Once that card is paid off, again, pay the minimum balance of all but one of your remaining cards. Then focus on that one card. Repeat.
Some people like to pay off the card the highest interest card first, others like to pay off the smallest balance first (get it out of the way), while still others tackle the largest balance first. No matter which method you use – just get serious about your debt.
Step 4. CONTINUE TO LIVE LIKE A COLLEGE STUDENT
Do not spend that first paycheck on a new car, an expensive apartment or dinners out every night. Do yourself a favor and continue to live like a poor, cheap college student for the next couple of years (with a clean bathroom however). This period will allow you to get your finances in order, pay off debt, attack student loans, save some cash and beat your friends to retirement!
If you need help getting financially organized after graduation, Capital Budget Strategies, LLC, Austin’s best Financial Coach, can help.
For only $149 (or $99 for new graduates, military or first responders) we will help you determine your net worth, analyze your spending, set up a monthly household budget, an emergency fund, a snowball debt repayment plan and let you know how well you are doing saving for retirement. Finally, we will review your bank accounts and introduce you to on-line banking and automated payments.
Our Austin Money Coach can meet at your office, your home or at our home-office. We can meet during the day, in the evening and even on weekends.
Give us approximately 4 hours and start your journey to winning your retirement!
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