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Managing your finances as a young professional can be a real balancing act. Whether you’re just starting out or getting settled into your career, you’re probably juggling a number of competing financial priorities like paying down your student loans, making rent, and trying to save what you can each month.
As you navigate this chapter in life, here are a few important things you can do to help build a solid financial foundation and set yourself up for success in the years ahead.
A budget helps you see where your money is coming and going each month. For example, how much is going toward essential expenses like rent and utilities? How much is being spent on discretionary items? Seeing a breakdown of your expenses can shine a spotlight on where you could save more.
If you’ve never put together a budget or spending plan before, we have a few budgeting methods for you to consider depending on your goal. Whichever method you end up using, try to stick to your budget consistently.
It may take some trial and error to find a budget that works for you, so don’t be too hard on yourself if you overspend every now and then. The key is to review your spending regularly and see what adjustments you need to make over time. A budget plan is not meant to be static. It should evolve as your financial situation changes.
Good to know: You don’t have to do all the math yourself. There are many budgeting apps out there that can help you track those expenses. And assuming you have some money left in the pot after all your expenses are accounted for, you can decide how to put that money to work.
Financial emergencies can happen to anyone. Whether it’s a surprise medical bill or urgent car repairs, maintaining a healthy emergency cash reserve can help you cover unexpected expenses that might otherwise put a dent in your finances or get in the way of you reaching your financial goals.
Ideally, your emergency fund should be big enough to cover at least three to six months of your living expenses. But this is a general target. Depending on your personal situation, you may need more.
For many young professionals who are just entering their careers, retirement planning is probably not top of mind. But even if retirement may be decades away, it’s never too early to start building your nest egg.
If your employer offers a workplace retirement plan like a 401(k) plan, consider setting it up and maximizing your annual contributions if you can. Because the sooner you start saving, the more time you can give your money to potentially grow, especially through the power of compounding.
And if your employer offers to match your contributions up to a certain amount, you’ll want to take advantage of that perk.
Retirement accounts can be a good place to park your savings thanks to some of their tax benefits. For instance, pre-tax contributions to a 401(k) may help lower your taxable income.
If you don’t have access to a 401(k) plan through your employer or if you work for yourself, you might want to explore different types of retirement plans, such as an IRA.
Saving money can be easy if you don't have to think about doing it every month. If you know how much you can put toward your emergency fund, retirement, or general savings account on a regular basis, you may want to automate your savings (if this option is available through your bank).
Take for example that emergency fund you’re building. You can open up a high-yield online savings account and set up recurring deposits through a linked account. The same can be done with your retirement savings. Decide what percentage of your pay you can afford to put aside each month and let your employer automatically deduct it from your paycheck.
Whether you have student loans or credit card debts to pay off, some experts recommend you tackle the loans with the highest interest rates first because interest payments in these loans can really add up. The quicker you can pay off your debts, the sooner you can free up more money in your budget and put that extra cash toward something else, like a short-term savings goal or your retirement account.
This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this website were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. You are not permitted to publish, transmit, or otherwise reproduce this information, in whole or in part, in any format without the express written consent of Goldman Sachs. This foregoing restriction includes, without limitation, using, extracting, downloading or retrieving this information, in whole or in part, to train or finetune a machine learning or artificial intelligence system.
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