The following article is written by our partner in personal finance, Adam Carroll.

Building Your Post Grad Life

For the past several years you’ve lived in the protective cocoon of college where things were (for the most part) fairly safe and laid out for you. Now that you’ve graduated, your ability to spread your wings, decide your own fate, and build a life as a bonafide adult is here!

While the freedom of not writing papers or having exams to study for is an incredible feeling, there are some lessons to be learned in the way of “adulting”. The following is a list of take-aways and to-dos that will help you navigate this path and build a bigger life for yourself:

Your First Job

The first full-time place of employment will be filled with all sorts of responsibilities and decisions. Two of the most immediate decisions you’ll have to make are: filling out your W4 form and deciding on whether or not to participate in the 401k plan.

  • The W4 form tells the payroll team how much in taxes should be taken out of your paycheck. The lower the number you put on the form, the more taxes that will be taken out. The logic behind this is you’re asked how many dependents you have on the form, and the more dependents, the greater the likelihood of deductions on your 1040 tax return. The lower the number of dependents, the fewer the deductions, and the more in taxes you’re likely to pay. If you are used to getting a refund at tax time, put zero for now and move on. Otherwise put a 1 on the form and consult with someone knowledgeable about taxes within 6 months to see if you should change the form to adjust your withholdings.

  • When asked about your participation in the 401k plan, say yes and start by contributing as much as you can up to the company’s match amount. In most cases, your employer will match somewhere between 2-5% of your salary (you’ll have to put in that much as well). By agreeing to contribute to the 401k plan, you take advantage of automatically putting money away for your own retirement as well as the incredible power of compounding. By contributing from day one, you’re less likely to realize the money coming out of your paycheck -- it will just become habitual!

Health Insurance

According to current law, you are eligible to stay on your parent’s health insurance until you’re 26. That being said, if your employer is offering a health insurance benefit, it’s probably time to give your parents a raise by tackling this expense yourself. Typically speaking, having a family on health insurance benefits is more expensive than if just a husband and wife are covered. By removing yourself from your parent’s insurance, you’ll save them some money every month and you’ll begin to feel more in control of your plan by learning how to navigate early. 

You’ll have several options to choose from when picking your health insurance plan, most of them having to do with the level and amount of out-of-pocket deductible that you’re responsible for before the insurance kicks in. With a higher deductible, you’ll spend less each month in insurance premiums. However, that means you should probably have some money tucked away in an emergency fund just in case. Consult with an HR representative at your company to dig into the details of the health insurance offerings before signing up officially. If you’re generally a healthy person, some of the programs may have more coverage than you’ll need.

If the extra $100-500 in insurance premium coming out of your paycheck means the difference between struggling and living, there’s nothing wrong with staying on your parent’s health insurance as long as the money you’re “saving” is paying off debt or going to build an emergency savings account. Ideally, you’ll probably have at least a raise or two in the next few years which will make that expense a little more manageable.

A Place To Call Home

Picking out a house or apartment to rent is an exciting next step in your transition to “adulting”. While the ones with a lot of nice amenities would be awesome, keep in mind that every extra dollar you can save will help you pay off your student loans, credit cards, car loans, and weekend trips!

While you’re on the hunt, ask about the average cost of utilities, if there are any parking expenses, and any other unexpected bills that may come up while living there. If you plan on living with a roommate, be candid with each other about your credit scores and if you’ve had any hiccups on payments. If one of you has a less than stellar credit history it may mean that one person is on the lease (and officially on the hook for all of the rent) and the other is paying their share monthly.

Having a place of your own is an important and fun step after finishing school, but you must continue to live within your means for a bit longer. If living at home is going to save you a bundle that could go towards debt elimination or saving for a down payment on a car or home, you may be wise to consider that route.

Being Aware of Impending Payments

Many recent graduates make one critical flaw as they build their post-graduate lifestyle -- forgetting that the student loans they took out in school will soon have payments coming due.

While there are several different repayment options to choose from that will impact your total payment, it’s best to assume that your monthly payment will be around 1.1% of your total balance due (for budgeting purposes). So, if you’ve borrowed $40,000, you’re likely to have a $440 monthly payment over 10 years. Building that amount in your budget (or more to pay it off faster), is a wise idea even before receiving your first payment notice.

A good rule of thumb is every dollar borrowed is two paid back unless you’re attacking that debt quickly. So budget accordingly and keep your lifestyle in check so you have money to spare each month.

Staying Wise With Money

One of the most complicated things you’ll encounter as a newly minted graduate is the delicate balance between the lifestyle you’d like to be living, the one you can afford, and remaining true to your core values as it relates to generosity and giving.

The most guaranteed way to live the life and lifestyle that works within your budget is to automate as much as possible, in effect so it becomes habitual and intentional. Automating your charitable donations, your student loan payments, and your savings and investment contributions will take the decisions out of how much you have to spend on lifestyle. Following this advice will help you live your life fully without sacrificing those things that are most important to you and to the future you.

Adam Carroll

Personal Finance Expert and Author


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