Top 10 Financial To-Dos for Today's Grads

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Dear Readers,

This is always an exciting time of year as new grads—and their parents—anticipate the opportunities and challenges that lie ahead. And apparently, there are lots of opportunities when it comes to employment. According to the National Association of Colleges and Employers (NACE) Class of 2019 Student Survey the job market for new grads is the best it's been since 2007. That's good news for young people starting out in an increasingly complex financial world.

It's those complexities—from managing current debt to saving and investing for the future—that have parents looking for ways to help their kids handle the increased financial responsibilities that come with this new phase of life. So to help today's graduates get a financial head start—and to help parents coach them from the sidelines—here's my list of Top 10 Financial To-Dos. They don't all have to be accomplished right away but, once they become good money habits, they’ll help create an ongoing sense of both personal and financial accomplishment.

1. Live within your means—Having a steady paycheck can feel pretty freeing—as long as you realize it has its limits. To make sure you have enough to live on, take a look at what you need vs. what you want. Start by adding up essentials like rent, transportation, groceries, utilities, student loan payments, car payments, etc. Don't just guess—write them down or use an online budgeting tool. Now subtract this amount from your take-home pay. What you have left is what you can direct toward things you want. Maybe you'll have enough for everything; maybe you'll have to make trade-offs. The important thing is to realize that you're in control. Want to splurge? Great—as long as you're willing to pass on something else to pay for it.
2. Put banking on automatic—If you don't already have a bank account with online bill pay, open one and have your paycheck deposited directly into it if that's an option. Then consider setting up automatic payments for your regular monthly bills.
3. Keep a lid on credit and debt—Even when you're feeling pinched, don't supplement your income with credit cards. The last thing you want is to run up debts you can't easily pay. Charge only what's absolutely necessary and always pay off your balance in full and on time each month. Limiting yourself to a single card will make life easier, while preventing you from getting in over your head. It will also help you build a credit history.
4. Prepare for the unexpected—Set aside a certain amount each month, no matter how small, for emergencies. Eventually you’ll want your emergency fund to cover three-to-six months of fixed expenses in case you ever become ill or unemployed. Put the money someplace easily accessible, such as in a savings account.
5. Have the right insurance—Take advantage of the health insurance offered by your employer. If that's not available, look for a low-cost, high-deductible policy. (Or alternatively, you can also be covered by a parent’s policy until age 26.) Health insurance is an absolute must at any age, as is car insurance if you own a vehicle. And while you're thinking of insurance, you might also look into renters insurance. It's pretty low cost, but can be a lifesaver.
6. Get a jump on savings—Start this important habit right now. Open a savings account and try to put aside a few extra dollars each month. In fact, make it part of your monthly budget and set up an automatic transfer from checking to savings. Set some goals—a trip, a new car, even a special night out—and use them as a motivation to save.
7. Plan for retirement—Although retirement is a long way off, put it on your list of goals. If your employer offers a traditional 401(k) or a Roth 401(k)—take advantage of it by at least contributing enough to get the full company match. If not, open an IRA. A Roth IRA is often a good choice for a young person because, while you don’t get the tax advantage up front, withdrawals are tax-free after age 59½ when you’ll likely be in a higher tax bracket.
8. Stay on top of student loans—Getting behind on student loans can mean mounting fees and penalties. Find out about repayment processes and when repayment should begin—and always pay at least the minimum on time each month. Studentaid.gov is a good resource for more information on how to repay student loans as well as loan forgiveness programs for certain types of work. 
9. Learn to invest—Once you have some money saved for your long-term goals, consider putting it to work by investing. Depending on your tolerance for risk, a broad-based stock mutual fund or exchange traded fund (ETF) may make sense. Investing in equities will give you the opportunity for long-term growth, valuable at any age, but especially when you're young. It doesn't necessarily take a lot of money, especially if you invest in a retirement account. There's lots of investing information online. Or ask a family member or friend to help you get started.
10. Spend mindfully—To me, this is the crux of it all, whatever your age or financial situation. Spending mindfully means knowing where your money is going—and where you want it to go. It means setting realistic goals and working toward them. And it means being conscious of your finances, whether during lean times when you have to cut back or flush times when you can afford to treat yourself. Ultimately, it means you control your money rather than having it control you.

Keep these 10 things top of mind and you'll be ready for the next adventure!

Have a personal finance question? Email us at askcarrie@schwab.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries, contact Schwab.