You've landed your first job out of college: congrats. The days of black bean-based dishes and Bud Light are behind you and it is all smooth sailing with two paychecks a month, an apartment that isn’t a dorm room and the freedom of young adulthood.
Or so you think.
While that first check might seem like a lot of money compared to your summer salary, the truth is, it won’t go very far unless you are smart about it. It is time to starting thinking about finance, namely yours.
Forbes caught up with three experts on how millennials can start early with strong personal finance habits and avoid mistakes that will lead to a lack of financial independence down the road.
Today, we will focus on what to do when you land your first job, tomorrow’s article will offer on psychological tactics to help save and the third post in this series will highlight everyone’s favorite R word: retirement.
Good Habits go a Long Way
All experts are in agreement about the first step to smart personal finance: set up good traditions.
"Good habits rule the day," says JJ Montanaro, a certified financial planner at USAA. "Build a plan to spend less than you earn and save consistently," which he admits, is a "fancy way of saying budgeting."
"The biggest challenge for budgeting is tracking the daily expenses. Keeping track of your car payments, your rent, your utilities and your cell phone is not necessarily difficult," says Montanaro, as there is a paper trail of these bills. For keeping track of lunches, shopping sprees or late-night bar crawls, Montanaro recommends figuring out a way that works for you, whether it be an fancy app or a old-school diary.
If you are new to budgeting, Montanaro recommends sitting down and writing out your expected expenses for the day every morning. That will help put your plans into perspective. If you are going out for happy hour drinks after work, maybe you should skip the morning latte or mid-afternoon muffin.
Establish Emergency Savings
Once you are tracking what is going in and out of your bank account, experts recommend setting up an emergency savings fund. This can cover anywhere from 3 to 6 months worth of salary as a back up.
If the idea of putting money aside when you can barely cover your expenses sounds intimidating, the experts say the key is to start small.
"Inertia is a very strong force. Millennials should think about starting saving immediately," says Luke Delorme, Research Fellow at the American Institute for Economic Research. "One good way to do this is to start with a low level of saving, like 3 or 4 percent of their income and then as they get raises throughout their career, you can increase the level of savings."
"Starting small can be extremely impactful," agrees Kristen Robinson, Senior Vice President, Women and Young Investors for Personal Investing at Fidelity Investments. "Even if you only put $25 a month into a longer term savings, whether it is put into retirement or saving for a house or a larger purchase, don't disregard how important $25 even a month is. It can add up quickly."
Pay Yourself First
After figuring out your monthly expenditures, decide how much you can put into savings and pay that amount to yourself first. This is a great way to make sure to prioritize saving.
"If you just have $100 taken out of your paycheck automatically, it is going to be a lot easier for you to follow that plan than it is if you are waiting until the end of the month and just waiting to see how much you have to put away into savings," says Delorme.
Consider your Credit Cards
It is not enough to look at where you spend your money, it is also critical to think about how you spend it. Even if you are careful with credit cards and don’t treat them like free money, it is important to asses what your cards can do for you.
"Look around and see what credit cards can help you save versus help you spend," says Robinson, who recommends having a credit card that offers the ability to put 2 percent back into your 401k.
Other finance bloggers recommend snagging credit cards that offer high sign-up bonuses (in terms of points) that can translate to perks like free flights or hotel stays. However, many rewards credit cards have high interest rates, so it is extra important to pay those bills on time.
"The number of credit cards impacts your credit scores," adds Robinson. "If you are going to a store and opening up a credit card because you want a discount, that may not be a good idea. At the end of the day, the more credit that you have that is outstanding adds up. It impacts your credit score."
Personal finance might sound like a scary word, but it is something all millennials should be thinking about, especially when they start their first job. The habits that are fostered and the money that be saved now, can impact someone’s financial future five, ten, thirty years down the line.
"Make sure that you are setting yourself up for living the life that you want to live," says Robinson. "The sooner you start saving, the more choices you will have in the future. And likely, you will be able to live those dreams that you have."