Graduation is the end of one phase of your life — and the beginning of an exciting new one. You’re on your own. You’re ready to start your career (or take a stop-gap job until you find the right position in your field). And you’re poised to make your own financial decisions, maybe for the first time in your life.

You have all the power here. But, as they say in Spider-Man, “With great power comes great responsibility.”

Here are some steps you can take to make responsible choices with your finances as you’re starting out.

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Know What You Can Really Spend

If you haven’t had a job before, you might be surprised at the difference between your salary and the amount of money you actually receive. Remember that your salary represents your gross earnings. That is the full amount your employer has agreed to pay you. However, your paycheck will include deductions for federal and Hawaii taxes, social security and Medicare, and other required and optional expenses. In your paycheck, what you’ll receive is the amount after those deductions, or your net pay.

Why does that matter? Well, it can be tempting to go a little wild once you start a new job with a larger salary than you’re used to. You might have a new apartment to outfit or need a new (or used) car to get you to and from your new gig. Hold off on spending too much of your paycheck until you see what your net pay is each pay period.

Make a realistic budget, including your net pay, your fixed expenses (rent, car payments, insurance payments, and other required bills), your variable expenses (groceries, gas, utility bills, and clothing, for example), savings (a fixed amount or a percentage of your net pay) and allowance for fun spending. A budget should be your monthly saving and spending plan, not a restrictive system that you will rebel against the first chance you get.

Dream about Your Future — and Make It Happen

What are your financial goals? Do you want to make sure you have an emergency fund to cover unexpected expenses? Want to take a great vacation? Plan to buy a home? Your budget for savings should include all your financial priorities. For example, if you want to invest and save for the down payment on a home, make sure you allocate a portion of your monthly savings to each of those goals.

We do recommend filling that emergency fund first, if you don’t have one. Even $1,000 in the bank can help you avoid using your credit cards for every emergency. 56% of Americans don’t have money in the bank to cover an unexpected $1,000 expense.

Consider Saving Any Windfalls

You might get a big tax refund or a bonus for good performance. It sounds like so much fun to spend that money on something you’ve been eying. But that won’t help your long-term financial health. Instead, save at least half of it and use the rest to have some fun. Or put part of it toward your long-term savings goals and add the rest to your vacation fund, so you know you will be spending it on something fun, even if it’s not right away.

Go Low When You Can

When most of us get a raise, we tend to level up our spending to match it. But unless your previous budget was so restrictive you were unhappy all the time, consider continuing to live on your previous salary and banking all the excess funds. Then when you get your next raise, you can either level up to match the prior raise or continue living on the same salary. There are some living expenses you can’t control, so ensure that you’re meeting any increases in fixed expenses when you’re saving your raises. You don’t want to feel too deprived.

Make Smart Debt Choices

Repeat this sentence: Debt isn’t always bad. No matter what you may have heard, borrowing money is not always the wrong choice. It is more important to manage debt wisely than to avoid it altogether. Only borrow when you need to, such as to finance a new business, buy a home, or purchase a vehicle. Leverage your credit cards for rewards if you can pay off your balance in full each month. If you can’t cover your expenses with your regular salary, you may need to revisit your budget or cut back in some areas.

Following these guidelines will help you set yourself up for lifelong financial success. Contact us for personalized advice on your next steps.