Graduates: as you transition to the next phase in your lives, money management will become a bigger responsibility. You’ll likely make more money but will also have bills – and probably debt – that you previously never had to deal with. By establishing healthy financial practices early on, you can set yourselves up for a lifetime of financial success. To that end, here are four money management tips to get you started.

Live within your means and avoid debt

While there is nothing wrong with buying something you want, it’s important to first understand the impact of your financial decisions. Define what you want versus what you need; acknowledge that needs come first and accept that you cannot buy everything you want.

Additionally, remember that credit doesn’t make everything affordable. While there is immediate gratification in buying the things you desire, the satisfaction probably won’t last as long as the credit card payments that go along with it.

Create a budget

Earmark parts of your income for regular expenses (e.g., bills) as well as varying costs like groceries and gas. Allocate a reasonable amount (10%-15%) for saving and investing, too. Really, your budget should account for whatever you normally spend money on: entertainment, dining out, etc.

Remember: the point of a budget isn’t to track your expenses but to make a plan that ensures you have money for the things you need when you need them – both now and in the future.

Anticipate school loan payments

Review the details of your student loans: find out when they go into repayment and how much you’ll owe monthly. Be sure to keep these costs in mind when you make financial decisions. For example, if you are searching for an apartment, factor in your student loan bills when you estimate how much you can afford on rent and utilities.

Save and invest

Build an emergency fund to pay for unexpected expenses that you couldn’t afford otherwise (e.g., medical bills or car repairs). Doing so can help you avoid debt. Aim to set aside six months’ worth of living expenses for emergencies.

Also save for retirement as soon as you can. Invest through an IRA or through your employer’s retirement plan if they offer one. With all of your new financial freedoms and responsibilities, saving and investing might be the last thing on your mind. However, it’s important to start as soon as possible to give compound interest more time to work, and your money more time to grow.

This article is for purposes of information and education only, and is not intended as tax or legal advice. Consult your personal tax and/or legal advisor for information specific to your situation.

Covenant Trust Company is a financial services company owned by the Evangelical Covenant Church and its affiliates. Our services are available to anyone in need of asset management, retirement planning, legacy planning, gift planning, or trust services. In addition, we seek opportunities to encourage and promote healthy financial habits.

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