From world-expanding classes to parties you swear to never talk about again, college is a time of growth and self discovery.
Graduating from meal plans and dorm life can be scary, but it’s also a time to spread your adult wings and show your family (and yourself) what you’re capable of.
Starting out on your own can be stressful when it comes to money, but there are a number of things you can do before graduation to make sure you’re prepared.
Think you’re ready for the real world? Check out these seven financial milestones you could consider hitting before graduation.
Milestone No. 1: Open your own bank accounts
Even if your parents financially supported you throughout college — and they plan to support you after graduation — aim to open checking and savings accounts in your own name by the time you graduate.
Getting a checking account may be useful for receiving future paychecks and sending rent checks to your landlord. Meanwhile, a savings account can offer a higher interest rate, so you can start building a nest egg for the future. Look for accounts that offer low or no minimum balances, no monthly fees, and convenient online banking apps.
Reviewing your account statements regularly can give you a sense of ownership and responsibility, and you’ll establish habits that you’ll rely on for years to come, like staying on top of your spending.
Milestone No. 2: Make, and stick to, a budget
The principles of budgeting are the same whether you’re living off an allowance or a paycheck from an employer — your total income minus your expenses should be greater than zero.
If it’s less than zero, you’re spending more than you can afford.
When thinking about how much money you have to spend, “be sure to use income after taxes and deductions, not your gross income,” says Syble Solomon, financial behaviorist and creator of Money Habitudes.
She recommends making a list of your bills in the order they’re due, as paying all your bills once a month might lead to you missing a payment if everything has a different due date.
After graduation, you’ll likely have to start repaying your student loans. Factor your student loan payment plan into your budget to make sure you don’t fall behind on your payments, and always know how much you have left over to spend on other things.
Milestone No. 3: Apply for a credit card
Credit can be scary, especially if you’ve heard horror stories about people going broke because of irresponsible spending sprees.
But a credit card can also be a powerful tool for building your credit history, which can impact your ability to do everything from getting a mortgage to buying a car.
How long you’ve had credit accounts can be an important component of how the credit bureaus calculate your score. So consider getting a credit card in your name by the time you graduate college to begin building your credit history.
Opening a card in your name — perhaps with your parents as cosigners — and using it responsibly can build your credit history over time.
If you can’t get a traditional credit card on your own, a secured credit card (this is a card where you put down a deposit in the amount of your credit limit as collateral and then use the card like a traditional credit card) could be a great option for establishing a credit history.
An alternative is to become an authorized user on your parents’ credit card. If the primary account holder has good credit, becoming an authorized user can add positive credit history to your report. However, if he’s irresponsible with his credit, it can affect your credit history as well.
If you get a card, Solomon says, “Pay your bills on time and plan to pay them in full unless there’s an emergency.”
Milestone No. 4: Create an emergency fund
Being an independent adult means being able to handle things when they don’t go exactly as planned. One way to do this is to save up a rainy-day fund for emergencies such as job loss, health expenses or car repairs.
Ideally, you’d save up enough to cover six months’ living expenses, but you can start small.
Solomon recommends setting up automatic transfers of 5 to 10 percent of your income straight from your paycheck into your savings account.
“Once you’ve saved up an emergency fund, continue to save that percentage and put it toward future goals like investing, buying a car, saving for a home, continuing your education, travel and so on,” she says.
Milestone No. 5: Start thinking about retirement
Retirement can feel ages away when you’ve barely even graduated college, but you’re not too young to open your first retirement account.
In fact, time is the most important factor you have going for you right now, and in 10 years you’ll be really grateful you started when you did.
If you get a job that offers a 401(k), consider pouncing on that opportunity, especially if your employer will match your retirement contributions.
A match might be considered part of your overall compensation package. With a match, if you contribute X percent to your account, your employer will contribute Y percent. Failing to take advantage means leaving benefits on the table.
Milestone No. 6: Protect your stuff
What would happen if a robber broke into your apartment and stole all your stuff? Or if there were a fire and everything you owned got ruined?
Either of those situations could be costly, especially if you’re a young person without savings to fall back on. Luckily, renters insurance could cover these scenarios and more, usually for about $190 a year.
If you already have a renter’s insurance policy that covers your items as a college student, you’ll probably need to get a new quote for your first apartment, since premium prices vary based on a number of factors, including geography.
And if not, graduation and adulthood is the perfect time to learn how to buy your first insurance policy.
Milestone No. 7: Have a money talk with your family
Before getting your own apartment and beginning a self-sufficient adult life, have a frank discussion about your, and your family’s, expectations. Here are some topics to discuss to make sure everyone’s on the same page.
- If you don’t have a job immediately after graduation, how will you pay for living expenses? Is moving back home a possibility?
- Will anyone help you with your student loan repayments, or will you be solely responsible?
- If your family previously gave you an allowance during your college years, will that stop once you graduate?
- If you don’t have a robust emergency fund yet, what would happen if you were hit with a financial emergency? Would your family be able to help, or would you be on your own?
- Who will pay for your health, auto and renters insurance?
Graduating college and entering the real world is a landmark accomplishment, full of intimidating new responsibilities and a lot of exciting possibilities. Making sure you’re fully prepared for this new stage of your life can help you face your future head-on.