Many graduates begin life with a poor understanding of financial matters. Often, finances weren’t discussed at home or poor financial habits were instilled based on generational misunderstandings. Establishing well-informed, proven, and healthy financial habits is one of the best things new graduates and college students can do to start their adult lives well. Here are some of the best habits you can start developing as soon as you graduate:

Create a Budget

One of the first things you should learn is how to create and stick with a budget. Creating a realistic budget that includes your income, expenses, and financial goals is the best way to begin your financial future. Your budget should not feel like a prison that keeps you from having fun. Instead, it should feel like it is giving you more freedom. With a budget, you can plan for the future, feel confident when you are making financial decisions, and relieve yourself of the stress that comes from not knowing if you can pay your bills. When you create your budget, make sure that you give yourself enough money for each expense, even if it’s larger some months, and that you budget for fun or impulse purchases. If you give yourself money to play with, you are much less likely to blow your budget or quit using it altogether.

Pay Off High-Interest Debt

Begin developing a habit of good debt management as soon as possible. Even as a recent graduate, you can prioritize paying off any high-interest debt, such as credit card debt or student loans. Paying down debt early can save you money on interest payments and improve your financial situation. One way to pay off high-interest debt is by paying a bit more than the minimum payments each month. Even a small additional payment can help to pay down your debt faster. If you set up direct payments through your bank you won’t have to worry about forgetting and getting bad credit, and you will easily be able to pay extra without thinking about it.

Track Your Expenses

After making a plan for how you will spend your money, you should also track your expenses. When you are tracking your expenses, don’t focus on guilt-tripping yourself whenever you haven’t followed your budget. Instead, allow the record of your expenditures to teach you about your personality, habits, and weaknesses. Notice when and where you are spending your money and use that information to help you understand your cash flow and inform your spending habits.

Build an Emergency Fund

One of the best financial habits you can have is keeping an emergency fund. You should establish an emergency fund with three to six months’ worth of living expenses as soon as possible. Once you have established this fund, you should be careful to only spend it on emergencies and refill it whenever needed. This fund will provide a safety net in case of unexpected events like job loss, vehicle problems, or medical emergencies.

Assess Employee Benefits

Employee benefits can be an important part of life. If you have secured a job, carefully review the employee benefits package. If you are still job-seeking, make sure to learn about the benefits of each company you apply for. Many entry-level jobs don’t offer extensive benefits packages, especially if they are part-time. Make sure that you understand what benefits you are getting or not getting, especially things like paid time off and medical insurance. If available, take advantage of employer-sponsored retirement plans, health insurance, and other benefits that can save you money and contribute to your financial stability.

Start Saving for Retirement

You should begin saving for retirement as soon as possible. Many young people prefer to spend their money in other ways, feeling that retirement is a long way off and they will have plenty of time and make more money when they get older. However, beginning to save and invest while young can be one of the most powerful financial decisions you can make. The power of compounding interest can significantly grow your retirement savings over time and the more time you have, the greater your savings will grow.

Set Financial Goals

You will be more successful and achieve your dreams sooner if you set financial goals. When you are thinking about your future, take the time to create detailed and specific goals. You should make both short-term and long-term financial goals, such as saving for a down payment on a house, starting a business, or traveling. Having clear goals will help you stay focused and motivated. Most experts recommend setting dates for your goals and writing down specific steps for each goal that will help you stay on track and keep you motivated.

Live Within Your Means

One of the best things you can do for your financial future is to learn how to live within your means. This includes being able to pay all your bills, contribute to your saving or investment accounts, establish an emergency fund, and have a little extra for entertainment or fun. Living paycheck to paycheck is stressful, and for many people, unnecessary. By cutting back until there is enough to go around and creating a little margin in your budget, you will feel more freedom and security. Once you get your first real job or get a promotion, raise, or better-paying job, it is easy for that extra money to be simply absorbed by “lifestyle creep”. Avoid the temptation to inflate your lifestyle just because you have a job and income. Live below your means and avoid unnecessary expenses to maintain financial stability.

Build a Strong Credit History

Finally, take the time and effort to start building strong credit, right from the start. Establishing a good credit history is vital for future financial opportunities, such as getting a loan or renting an apartment. You can begin building a record of good credit by paying your bills on time, avoiding excessive debt, and monitoring your credit score regularly. If you don’t have any credit, you will need to open a credit account of some kind to begin establishing a credit score. Many credit card companies have cards just for people in this situation.

Conclusion

The best way to begin building a secure financial future for yourself is by providing yourself with financial literacy. Self-education, discipline, and resiliency in the face of failure will be your best tools against financial problems in the future. Learn these steps early on after graduating, and you will lay a solid foundation for your financial future and set yourself up for long-term success, no matter what career or path your life follows.