Sunday, May 6, 2018
By BRIANNA MCGURRAN
Ask 10 people for their definition of “adulthood” and you’ll get 10 different answers. Maybe it’s getting that first full-time job, buying a house or doing taxes without help – concrete moments that signal maturity and independence.
But financial adulthood, or managing money responsibly, isn’t tied to an age or a milestone such as starting your first “real job.” I knew I was a financial adult when I paid for a plane ticket with money I had saved in a “Fun Stuff” account. I’ve never been more excited to Venmo someone (my sister, who booked our tickets) directly from my bank rather than rely on my credit card.
You’re a financial adult when you save regularly, spend mindfully, face reality and know when to ask for help. If you’re graduating from college this spring, build these habits now.
Saving even a little bit every month is the single most adult financial move you can make.
Money is a way to get what you want: security and freedom. When you save a portion of the income left over after covering your fixed expenses, you’re preparing proactively for the future.
If the idea of sending this money to an “emergency fund” makes you completely tune out, just think of it as cash that’s there when you need it. You’ll be covered if you lose a job, but you’ll also have options if you decide to make a lifestyle change, such as moving to a new place.
Getting a full-time job with a $50,000 salary after being a college student who ate pizza four times a week can be a shock. But hit the pause button before you make a big purchase, says Therese Nicklas, a certified financial planner in Rockland, Mass. Make sure it will truly bring you joy, and that spending isn’t a way to get your mind off something else or compete with friends.
Take a look at your take-home salary and follow the 50/30/20 rule. That’s half your pay for necessities such as shelter, 20 percent for saving and debt payoff, and 30 percent for your wants. The adult part? Giving up your wants if your necessities or debts demand it.
“You can have all the things you want, just not all at the same time,” says Kailie Abascal, a certified financial planner in Vancouver, Wash.
NEVER FLINCH FROM REALITY
Financial adults don’t cower at the sight of their bank-account balance, even if it’s smaller than they’d like. Frankly assessing your personal financial picture will make it easier to manage.
If you have student loans, figure out what you’ll have to pay toward them after graduation. Use a student- loan calculator to see your monthly payment, and budget around that. Create an online account with your student-loan servicer and look up your interest rates. Know that if you put your payments on hold – to go to grad school, or if you’re unemployed – interest will accrue and your balance will grow, unless you have subsidized federal loans.
If you save for retirement in an employer-sponsored account, find out the vesting schedule, or the amount of time you must work there before any money your employer contributes becomes yours, Abascal says. You’ll have a clearer understanding of how much you’ve really saved if you end up leaving after a year or two.