Skip to main content
CFP Board LMAP Logo
Search Let's Make a Plan
Find a CFP® Professional
Please select a location from the dropdown.

By executing a search, I agree to Terms and Conditions for the Find a CFP® Professional Search

cancel
Powered By CFP Board

Adulting Checklist: Financial Roadmap for Recent College Graduates

Congratulations on your graduation! You’re now a young adult ready to declare your independence and take on the world. But adulting can have challenges and may not always be fun. Here’s an important financial guide to kick-start your adult life, build savings and make the grown-up world more enjoyable

Start Saving

Be a saver.

A good, general starting point is to carve out 20% of your income as a savings goal. If you can’t save 20% to start, save what you can — even 1% is still a good starting point. Then, on your birthday next year, increase your savings goal by 1%. Or when you get a raise, save part or all of your raise.

Set up automatic savings systems. It’s more effective and makes things simple. For example, set up automatic contributions to an employer 401(k), or set up a portion of your paycheck to be directly deposited into a savings account (most employers will allow you to split up direct deposits).

Create a Budget

Building good financial habits early on is important for setting yourself up to reach or exceed your long-term financial goals. A good general rule of thumb: Divide your take-home pay into three buckets: 65% to 70% for lifestyle spending and debt service; 10% to 15% for fun, vacation and gifting; and 20% for savings. Don’t spend more than you earn.

Check in on your cash flow every month: How much was your income? How much did you spend? How much did you save?

There are many apps available to help with budgeting. Mint and You Need a Budget (YNAB) are two of the popular ones that we see our clients use.

Have an Emergency Fund

Keep a minimum of three to six months of living expenses in cash for a rainy-day fund. Start with an initial goal of $1,000. If your expected monthly income is variable, have a goal of keeping 6 to 12 months’ worth of cash on hand.

It’s helpful to keep this emergency fund in a separate bank account than the main checking account you use for daily living. Out of sight equals less temptation to dig into the emergency fund for, say, that cool thing you just saw advertised on Instagram.

Protect Your Biggest Asset

Unless you had a rich relative who died and left you millions of dollars, your biggest asset is your ability to earn an income.

Assuming you start working at 23 years old and stop working at 65. You make $50,000 a year, and your income keeps pace with an annual inflation rate of 2% over time. You will earn more than $4.2 million during your working lifetime.*

Congrats, you’re worth a few million bucks! Protect your earning potential with disability insurance which will help you cover your bills in the event you suffer a major health event and can’t work. Consider getting as much coverage as you can qualify for; the coverage you get at work is likely not enough.

Not all disability insurance policies are created equal, and they can be complex. Do your homework — or get a qualified professional to help — to find the right coverage.

*This is a hypothetical example and is being shared for illustrative purposes only.

Systematize Your Debt Repayment

Whether it’s student loans, car loans or credit cards, many people have debt — we see that all the time. No one is coming to bail you out. If you have debt, your first order of business is to make sure you’re paying the scheduled payments on time. Consider setting up monthly automatic payments from your bank account, so you won’t miss a payment. Pick a day of the month as “bill day” (could be the same day as your “review monthly budget day”), and make sure all bills are paid.

Next, it’s helpful to understand your existing loans and liabilities. Get the details for each: What is the interest rate? What are the terms? What is the remaining number of payments? If you have surplus cash flow (or maybe birthday money from grandparents), consider taking a portion and paying down the highest interest rate loan, especially if it’s a credit card debt with a double-digit interest rate.

We’re currently in a relatively low-interest rate environment. Depending on your situation, it may be worth it to look into refinancing options and obtain a lower interest rate for your debts.

Manage Your Credit Score

Your credit score is sort of like your adulting exam score. A bad credit score can make life difficult, from getting a place to live, to getting a car loan, or even getting a new job. A good way to build your credit score is to find one credit card with lifestyle spending perks (money back on gas/groceries/etc.), use that for your monthly living expenses, then pay the monthly balance in full on time, every month. Note that the key is on time and pay the full balance. “On time and pay the full balance” also applies to all of your monthly bills (rent/mortgage, utilities, and any other loan repayments). This consistent activity creates a trail of trustworthy credit history, which shows the world you are responsible and can pay your obligations back on time.

Things that lower your credit score: missing or being late on a monthly payment, too short of a credit history, too few types of credit, or having too many credit cards or too many requests for new lines of credit. For example, opening up a new credit card for every store you shop at is bad for your credit score.

Ask About Employee Benefits

Job hunting or just got a job offer? Keep in mind your salary is only part of the compensation package when comparing offers. Look into what kind of employee benefits are available.

Here are some employee benefits to look for: paid time off; health/life/dental/vision insurance; retirement savings plans, such as a 401(k) or 403(b); healthcare spending or reimbursement accounts, such as Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and Health Reimbursement Arrangement (HRAs); relocation reimbursement; long-term or short-term disability insurance; tuition reimbursement; childcare benefits; gym membership or discounts; and wellness programs.

After you find out about the employee benefits that are available to you, take advantage of them. One of the biggest mistakes we see is not contributing enough to the retirement plan to get the employer’s match on retirement savings. The match is free money! Get as much as you can.

You may be in info overload status at this point, or you may be ahead of the game and have some of the checklist items crossed off already. Got questions? Find a CFP® professional to help you with strategies and recommendations that are tailored to your situation. It’s never too early to start a conversation. Many financial planning professionals will offer a complimentary first meeting to get to know you and for you to get to know them.


Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company (NM) and its subsidiaries in Milwaukee, WI. G Thomas Morris, CFP® and and LeTian Dong, CFP® are Insurance Agents of NM. This publication is not intended as legal or tax advice. Financial Representatives do not render tax advice. Consult with a tax professional for tax advice that is specific to your situation.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Get started on securing your financial future today
Find a CFP® professional
Topics
Young Professionals Budgeting Life Transitions Starting Out