Life Packs
Starting Out

Starting out can be scary. Whether you’re just starting out your career post graduation, starting out in a new city, or starting out in a new job, we’ve compiled resources that will help you through the transition. 

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July 4, 2022

Introduction

Starting out can be scary. Whether you’re just starting out your career post graduation, starting out in a new city, or starting out in a new job, we’ve compiled resources that will help you through the transition.

For the recent grads: Perhaps this is the first time you’ve been truly responsible for your finances 100%. Let’s help you develop a budget including those upcoming student loan payments, and make sure you’re spending at a level that will set you up for financial success. We’ll also make sure you’ve got an emergency fund set aside, because maybe mom and dad aren’t going to step in now that you’re on your own. Don’t worry, you’ve got us here too.

For those clocking in to a new job: There are a lot of things you’ll need to consider when making your elections for your new employee benefits. We’ve got you covered.

For those putting a stake somewhere new: There may be a lot of new things to consider if you’re starting work in a new city, or maybe you’re not sure about the tax law in your new state. Is there anything you need to be aware of? We’ll walk you through what you need to know!

Establishing Your Finances

Establishing a plan for your finances is the foundation of your financial success. Probably the most important piece of your plan is the dreaded B-word. Yup, your budget. Unlike the enemy dressed as a friend that is a piece of chocolate cake, a budget is actually your BFF. It will help you save towards goals, pay down debt, and prevent accumulating debt in the future.

The fact is only 32% of Americans maintain a formal household budget, and 31% of Americans have less than $500 saved to cover emergencies!

We want to help you start your plan early! The steps outlined here will help you establish a plan and avoid common financial mistakes that can take years to remedy.

Create a Budget

Creating a budget is the first vital step to establishing a plan for your finances. This will help you determine some key numbers:

  • How much money do you need each month to cover expenses?
  • How much extra is leftover?
  • How much are you saving (as a percentage of your gross income)?

This is a great opportunity to identify where you are spending money that you don’t need to. Although we don’t advocate for meticulously categorizing every expense, oftentimes you may identify some low hanging fruit such as unused gym or media memberships.

Create an Emergency Fund

Once you’ve got a handle on your budget, the highest priority is establishing an Emergency Fund for any unexpected expenses life may throw at you. This type of savings is most appropriately held in cash to make sure the funds are available when you need them. A high yield savings account can help you earn a little extra yield on your emergency savings, and you should utilize automatic transfers to build up this fund and avoid overspending.

Set-up Savings Buckets

You will also have other pre-retirement goals like buying a home, getting married or having a baby. These goals have different time horizons and it may be appropriate to invest these savings in the markets to try to earn a little bit more yield. However, all investing comes with risks so you’ll want to make sure you understand the risk of your investments before you start. Basic investment guidelines include diversifying your risk and minimizing your investment costs where you can.

Retirement

Everyone should have retirement savings. Set a goal of working towards saving approximately 20% of your gross income towards retirement in an effort to maintain your standard of living after you’ve retired. For tax efficiency you should prioritize contributions to employer-sponsored retirement plans (i.e. 401k) or IRA accounts (subject to income limitations).

Where Do I Keep My Money?

Seems like a silly question, but there are a few options for where to stash your cash. Figure out which is best for each of your goals.

Protect Your Savings

You’re doing such a great job at saving, don’t throw it away by not protecting your money. Make sure you have insurance in place. Health insurance to cover medical expenses, auto insurance for your car, and renters or homeowners for your possessions.

Establish savings goals, start saving and investing, and track your progress. It’s as simple as that!

Starting a New Job

Gone are the days when you would graduate from college, get a job and stay there for the entirety of your career. A Gallup study showed that 21% of millennials have changed jobs within the past year, which is more than three times the number of non-millennials who report the same. Fifty percent of millennials and 40% of non-millennials don’t expect to be working at their company a year from now.

All of this is to say it’s highly likely you will be changing jobs a few times throughout your career. Whether you’re starting your first job, or your fourth or fifth, we’ll walk you through the things you should consider when starting a new job.

Salary

Money isn’t everything, but let’s face it, it’s a big factor. Whether you’re starting your first job or considering changing jobs, do your research and in the words of Khalid, “know your worth.” Is the salary enough or would you rather be earning more? Will you be able to live on that amount? Take a look at your budget to help you determine how comfortable you’ll be on that amount.

If the answer is “not comfortable enough,” then ask if the salary is negotiable. Most employers may not lead with that, but if asked they may be willing to negotiate. And if the candidate has a lot to offer, the employer will most likely want to give a little to get the hire.

Benefits

You should find out your total compensation plan. Compensation is not only salary, but other benefits as well that can include:

All of these items should be considered with evaluating your total compensation.

60% of people report that benefits and perks a major factor in accepting a job offer

Growth Opportunities

Most people don’t want to have to change companies every year. Knowing that you will face new challenges and acquire new skills and experience without having to leave is a big incentive. Ask about not only vertical growth, but lateral opportunities as well. As your skills and experience evolve, you may find your interests and goals evolve, too.

Company Culture

Although it’s tough to get a complete picture just through the interview process, try to get an idea of the company culture. Look at their social media pages, Glassdoor reviews. Talk to current employees to get their thoughts and reach out to former employees through LinkedIn to find out why they left. Take it all into consideration as a whole, but keep in mind consistent themes (good and bad)

Stability

Even if the position checks all the boxes and seems to be a good fit, none of it matters if the company isn’t around for you to grow with. Do some research- does the company have a history of cutbacks or layoffs, legal or financial troubles? If the company is public, you can look at their financial statements and annual reports. A look through internet searches and social media pages could give you some insight if there are any red flags you should be aware of.

75% of candidates will research a company’s reputation before applying for a job opening. And 75% of candidates would not take a job with a company that had a bad reputation, even if they were unemployed.

The possibility of a new job can be exciting and stressful! The employer is investing in you as much as you are in them and wants a good fit, too. Be sure all your questions are answered and don’t feel shy about asking too many. Take your time and thoroughly consider all the factors before making a decision.

Relocating Someplace New

Whether you’ve done it a million times or maybe this is your first time, moving is an exciting and stressful time! In addition to packing boxes and buying new furniture, there are various financial considerations to be made. We’ve done the “heavy lifting” (pun intended) to help identify what you’ll need to know before signing your new lease or buying a new home in a new city or state.

Set Your Budget

Create your budget for your projected housing expenses. The cost of living varies from region to region so it’s vital to know what your new salary will afford. When you calculate your monthly take-home pay from your new job, make sure to consider your new state and local income taxes.

Consider how much it will cost to move. Costs for shipping, gas, packing supplies, movers (if used) pile up quickly. Once you’re at your new place, keep in mind you’ll also incur deposits and utility setup costs. Make sure you have a good cash cushion in case any unexpected things come up during your move process. Use a home cost calculator if you’re not sure what the total cost of a home will be (this includes property taxes, homeowners insurance and maintenance if purchasing a home).

If you’re moving for a job, check if your new employer covers any relocation costs. Employers often offer relocation assistance/reimbursement for services like packing, movers, home selling assistance, temporary housing, and house-hunting trips. Make sure you know what’s provided!

Weigh Your Options- Rent or Buy?

If buying a home is an option financially for you, you should consider whether it makes more sense to buy or rent. This can depend on your budget, the local housing market, your family size, and your expected time frame for staying at this job or in this particular city.

Protect Yourself

Lastly, even the best laid plans come with unknown risks and you’ll want to make sure you’re adequately protected. Renters insurance is an inexpensive way to purchase coverage for your personal property as well as liability coverage. If you got rid of some things in your move, or purchased new, nicer things, you’ll want to revise your policy so you’re appropriately covered. If you own a car, a new zip code also means a different premium. Update all your coverages to make sure you’re getting the right coverage.

72% of people say it takes 2-3 months to settle into a new job

Once you get there, be patient! It takes time to acclimate to a new job or city. A survey found that 72% of people say it takes 2-3 months for them to settle into a new job, and feel comfortable showing their “true self”, and it can take equally as long to settle into your new neighborhood. Make sure to get to know your transportation options to allow you to easily get around! If you take these steps, you should be off to a great start!

Managing Your Debt

Dealing with debt is a challenge that most of us will face. We’re wired to feel guilt when we owe money. Not all debt is bad, however. For some, debt can be a way to climb to the next level of building or growing wealth.  Student loan debt for example, is a way to finance further education and training that can lead to a higher paying job. A mortgage can allow for possible growth as a real estate investment.

But debt, if not properly managed, can also lead to difficult financial positions. Consumer debt such as personal loans and credit card debt can be a hindrance on your ability to save and if left unchecked, may become overwhelming.

Types of Debt in Billions
Most common types of debt in the US

Types of Debt

Understanding the types of debt that exist is a critical part of managing your debt.  There are different types of debt such as secured debt versus unsecured. There are also differences in the way you pay your debt. Debt can be revolving or installment.  Finally, understanding the difference between good debt and bad debt can help you manage and prioritize any potential repayment strategy.

Student Loan Debt

Many of us are familiar with this type of debt. Higher education is expensive and many people have found it impossible to come out of school without at least some debt. Next to a home purchase, this is where some of the largest debt balances are found.  Managing student loans by paying attention to the types of repayment plans and the interest rate can be critical to making progress on your loans.

Credit Card Debt

Credit card debt is the most common and toxic debt a person can have. With high interest rates and burdensome fees, credit card debt is a slippery slope that can be overwhelming. Understanding borrowing alternatives and making sure you have a plan to pay down this type of debt can go a long way to making sure your financial future is secure.

Managing Debt as a Couple

It may be that you have incurred debt as a couple or perhaps you brought debt from your earlier life. Either way, managing debt with a partner has its own set of advantages and challenges. You may find that you and your partner have different views of debt. You may also find that you are aligned with one another and can combine resources to manage your debt effectively.

How Debt Impacts your Credit Score

All debt has an impact on your financial picture. One of the ways that your financial health is determined is by looking at your credit score. Understanding what goes into your score and how you can increase it is critical as you work to improve your financial condition.

Managing your debt, while not always easy, can have a huge and lasting impact on your ability to reach your financial goals.

Buying a Car

Picture it: top down, sun shining, the wind in your hair. Sounds pretty good, right? Buying a new car can be fun- everyone likes new stuff (or new-to-you stuff)! Here we’ll help you figure out the right car purchase for you.

How Much Can I Spend?

First thing’s first- how much can you afford? Figuring this out will help you decide what kind of car you should look at. Consider your current budget, other expenses, goals and family needs coming up. If you’re paying cash, make sure to keep your emergency fund intact. If you’re financing, look at your monthly budget to see what monthly payment will fit within your means. Do some research before you head to the dealership to see what interest rates you qualify for so you can compare with what they offer. Depending on the interest rate (0-3% is a fair rate), financing can make a lot of sense. Once interest rates get >5% we want to think through other options. Check out a car payment calculator to help you figure the various payments based on interest rates, loan terms and down payments. Keep in mind the longer the loan term, the more interest you will pay. Below you will see the amounts of interest you will pay with various loan terms. Don’t forget to include any increase (or decrease) in auto insurance premium in your calculations.

Monthly Payment and Total Interest Paid per Loan Term

Buy or Lease

Should you buy or lease? Leasing a car is like renting it from the dealership- you pay a monthly payment for the life of the lease (usually 3-5 years) and then you return it to the dealer at the end of the lease. Buying, on the other hand, is you owning the vehicle either outright if you paid cash, or at the end of your loan if you finance. There are pros and cons to each, so consider them carefully before making your decision.

Dealerships

If you felt some anxiety reading that word, we get it. Dealerships get a bad rap. But if you’re getting a used car, getting one from the dealership might be the better route to lessen your chances of getting a ‘lemon.’ To ease the stress of going to the dealership, here are a few tips when you head to the dealership:

  • Check out more than one dealership and research purchase prices ahead of time on Kelley Blue Book.
  • Email a few dealers before going in person to get quotes. You can then compare them and get the dealerships competing/lowering their prices over email (saving you time in-store).
  • Get pre approved from your current bank or a credit union for an auto loan, so you know both how much you are pre approved for and at what rate. This will force the auto dealership to match or beat your bank’s interest rate.
  • Don’t be pressured to purchase unnecessary add-ons, even if it takes 2 hours of arguing with the salesperson to get the superfluous additions removed (as was my painful experience).
  • Look for deals (clearing out last year’s new inventory), and be prepared to walk away if a dealership won’t give you what you want.

Auto Insurance

Finally, we’ve got to protect that shiny new ride! Having auto insurance is required by law. If you finance or lease, your lessor will typically require higher insurance limits than state required minimums (and you should carry higher limits than that anyway). This is a good time to check other insurance companies to make sure you get the best price.

Good luck on finding your new vehicle, and at the risk of sounding like your mom, drive safely!

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