Loretta Abrams, senior vice president of Consumer Affairs, HSBC-North America, offers the following tips for new graduates who are moving out and planning to live on their own for the first time:
Ready (Don't even think about moving out until and unless you have taken the following steps:
Secured stable employment. With a steady income, you need to establish at least six months of stability. If you don't have a job yet, continue your job search, get help with your resume, and your interview skills. Obtain an internship if possible to boost your resume.
Make sure you have the insurance you'll need. Do not drop your existing health insurance. Explore options available (Cobra and state insurance plans) and work with your parents to ensure coverage.
Think about your financial goals and develop your plan. You should determine short-term (6-12 months), medium range (1-3 three years) and long-term financial goals (5-10 years)
Set: (Now that the "Ready" steps are completed, you're ready to move to "getting set".
Create and stick to a budget. Once you get your job or paid internship, it's important to set a budget and track spending closely. Set a budget using realistic numbers for all fixed monthly costs.
Establish your savings program and an "emergency fund" of at least $1,000. Take advantage of higher interest online savings accounts. Set up a direct deposit into your savings account for a pre-determined amount to avoid the temptation of spending it . Only tap into savings in an emergency or to achieve financial goals you have been saving for.
Build and protect your credit score: Credit doesn't have to equal debt. It's important to establish credit early, and a healthy credit score is integral to your ability to achieve future goals such as renting your first apartment, entering your chosen profession or buying the home of your dreams. Understand and manage your credit score. Take advantage of the ability to obtain a free credit report each year. www.annualcreditreport.com
Find the right credit card for your needs and spending habits. Consider a card with a cash-back reward program and a low APR. Credit cards are not "magic money." Use it responsibly. Paying only the minimum balance each month allows debt to grow and makes reaching financial goals harder in the future. Try to pay off the full monthly balance each month.
If you have employment, make sure that you have adequate life, health and disability insurance coverage.
Go (now….with steps one and two above completed, you're ready to make the big move. So……your final check list should include the following:
Ask questions such as: Do I have enough money in my savings account to cover the first month's rent and any security deposit? Do I have money to purchase some basic furniture and household appliances I need?
Balanced and sustainable budget. Don't create new debt but ensure that you are able to comfortably manage your current obligations. Be prepared for "unexpected" or "unplanned" expenses now that you're "on your own". Remember to include your student loan payments in your budget. Students who graduated in May will be receiving their first bill in November or December. Consolidate student loans under one rate and one payment. Deduct interest paid on your student loans from your taxes.
Establish a system for filing and paying bills on time and stay organized. Many financial institutions offer online bill pay options that provide a quick, easy and safe way to pay bills.
Take advantage of your company's 401K program if offered and seek guidance from the plan administrators to ensure you fully understand your account terms and possibilities. If your employer does not offer a 401K benefit, look into opening a retirement account independently.
Treat your identity like cash. Shred receipts and financial documents. Protect personal information (DOB, DL#, SSN, Account Numbers, Passwords). Make sure online shopping is conducted only on a secure Web site. Don't discuss private financial matters in public or on cell phones. Don't write passwords or PIN on the back of bank ATM or credit cards. Mail bill payments from your home mailbox.
Congratulations --- you're ready to make the big move. Take advantage of the free resources on yourmoneycounts.com, which is available both in Spanish and English.