Best Financial Tips When You're First Starting Out

Any time you start a new chapter, it can feel overwhelming—especially if you’re a recent grad and just starting out in life as an independent adult.

Managing your finances can also seem intimidating when you’re first starting out. Between budgeting, saving, and investing, it’s easy to feel adrift amid all the information and advice.

Whether you’re recently out of school or you’re simply turning over a new leaf in life, a few simple steps can help put you on a path to financial security. Here are some key places to focus for anyone just starting out—or anyone ready for a new financial beginning.

1. Start saving early for retirement.

Retirement may feel like a lifetime away, but the earlier you start saving for retirement, the better.

A recent survey found that 70 percent of retirees would tell their younger selves to start saving earlier, and for good reason: There are lots of benefits to saving early in your career, like being able to make post-tax contributions to a Roth IRA and take advantage of compound interest, which is when your initial investment grows exponentially as interest accumulates over the decades.

Even starting small—think $20 a paycheck—adds up to a solid savings. Online retirement savings calculators can help you visualize how a small investment in your early 20s can eventually grow into a large nest egg by the time you retire.

2. Build up your emergency fund.

You never know when life will throw a wrench in your plans. From car breakdowns to temporary unemployment, there are countless situations that could arise when you least expect them.

Make sure you’re ready for the unexpected by starting to build up an emergency fund. There are lots of ways you can contribute to an emergency fund, including automatic deductions from your paycheck—a great way to “set it and forget it” and hold yourself accountable to saving—or lump-sum contributions, like depositing your yearly tax refund into savings.

3. Create a budget.

Tracking your spending, tabulating expenses, and calculating monthly income may not seem too exciting. But the benefits of budgeting are plentiful, from helping you save and achieve your money goals to putting you in the driver’s seat of your finances.

A sense of control over your financial situation is crucial for starting out on the right foot as you get established. A budget can help you understand what you can comfortably afford and which purchases are out of reach. This ultimately empowers you to make informed decisions about your spending and avoid trouble down the road.

Luckily, there are lots of free tools online to help you create a budget, so you don’t have to start from scratch. If you’re not sure how to get started, search for tools and worksheets that lay out the basics of budgeting.

4. Use credit wisely.

You may be wary of credit cards, especially if you’ve witnessed how credit card debt can become crippling. But “credit” isn’t a dirty word—it’s important to use it wisely as a tool in your financial quiver.

Opening a credit card that you pay off in full each month can help you build a good credit score, which will help you if you ever want to qualify for loans and competitive interest rates in the future. This becomes important if you ever hope to purchase a car, a home, or make other large investments.

Credit cards can also offer practical benefits and perks, like cash back on purchases or rewards on gas and travel expenses. Just be sure to avoid opening a card that charges an annual fee, and don’t use credit cards to make purchases you can’t afford.