Essential Financial Steps for Young Workers

Now that graduations season is over, hopefully your recent college grad is starting their first job in the real world.  There's a great article in the WSJ for those in their first 5 years on the job, with 6 things to make sure you are doing. Click here to read the entire article.

Here's the CliffsNotes (with our own thoughts sprinkled in) if you don't want to click on the article to read the entire thing:

1) Set a budget: (There is a lot of great free software out there to help track your expenses & budget.  Check out mint.com to start).

2) Save for emergencies:  Establish 3-6 month reserved of living expenses (in my opinion 6-12 isn't a bad idea).

3) Take stock of debt: This is especially important to pay attention to if you have student debt.  There are a number of relatively new debt repayment options for graduating students that have been put in place under the Obama administration.  The issue is you need to spend the time to understand the options and analyze which is best for you.

4) Think about Retirement:  Consider a Roth IRA if no plan is available through work.  Plan to increase savings % as you get raises.

5) Manage Risk: Evaluate insurance coverage (of particular note: renters, auto, health, disability).

6) Manage Taxes: Adjust your withholdings to avoid a big tax due, and to avoid a big refund. Track tax deductible expenses (charitable donations, student loan interest).

NerdWallet: Spending Habits

I am 26 years old and have had some bad spending habits and am currently in debt. What is the best way to pay it down?

I have been making $100,000 per year for the past couple of years. I have $30,000 in credit card debt. What is the best way of paying this down? What is a realistic goal for the amount of time it would take to pay this down?