You’re graduating, which is exciting and probably a little scary. Congratulations!

Hopefully you have gotten, or are working on, getting a job.

Once you’ve landed that job you will have a (hopefully) steady paycheck and need to figure out how to handle your own finances. You probably know that you should spend less than you earn, but that is only part of the equation, and spending money on utilities sounds less exciting than spending money on fun things. You will have to learn to balance your budget and desires.

Here are some tips for thinking about where this new income goes.

1. Look for relatively inexpensive housing and consider living with a roommate (or roommates). Of course you should exercise caution, but your first job will likely not allow you to afford the palatial apartment downtown. And your housing, while probably the largest portion of your monthly expenses, is not the only expense.
2. Speaking of housing, find out what utilities are like where you live. If you are in an apartment, the landlord will likely be able to give you a good idea of what utilities run on average. You should also make sure you know what is and is not included in your rent. Some apartments split the water and sewer bill between tenants in the unit, while electricity is separate. Include these estimates in your monthly budget.
3. At the beginning of your working career it’s tough to think about the end, but you aren’t going to want to work forever. It’s never too early to start putting away money for later. Compound interest and a long time horizon for investing are truly amazing.
   Does your employer offer a 401(k)? Talk to your Human Resources department and take advantage of that opportunity. If your employer offers to match a percentage of your paycheck that you put away, do it! Take that free money for your retirement. If your company’s 401(k) has a Roth option, stash away your retirement money that way.
4. Prioritize. You won’t have enough money to do all the things you want to do, which is hard. Take time to think through what is really important to you and train yourself to save for what you really want instead of what’s right in front of you. Set aside 5-10% for larger goals, like saving for a home down payment, your next car, or other big goals.
5. Save a little more from every paycheck. Appliances break, accidents happen. A security deposit on an apartment is expensive. You never know when an emergency will arise, so start stashing away a little (probably 5-10% of your monthly budget) for these unexpected expenses. Training yourself at the beginning of your career to keep an emergency fund will help you weather the difficult times.
6. Figure out a plan for paying off student loans, if you have them. We have an article with more detail about how to think about paying off your loans here.

Starting out is tough – you’ve gone from living with your parents at a time when they are likely at the peak of their earning potential to living on your own at a starting wage. It might be a big lifestyle cut, but try to see it as an opportunity to learn to manage your financial life on your own. Start small and, over time, small amounts put away for later grow.

Photo used under Unsplash Creative Commons Zero license.