Moderate Support • Early Career • Goal 8:
Plan for Future Needs
Action step 1.
Open a checking and/or savings account.
Opening a bank account where you can deposit your paycheck is an important step towards managing your finances. There are two types of accounts: checking and savings accounts.
A checking account is the best choice if you plan to make frequent purchases and withdrawals. You will get a debit card and/or checkbook to help you access your money.
A savings account is designed to store your money long-term. Often, there are limits to how many times you can withdraw money every month, but you earn more interest than you would using a checking account.
Explore your local banks or credit unions to discover account options charging low or no fees.
Resources
Action step 2.
Create a budget or money map.
Budgeting, or money mapping, helps you keep track of your income (money you earn) and expenses (money you spend) so you can make a plan to meet your financial goals. To begin the process of creating a budget or money map, you need to figure out:
- The amount of money you receive each month
- The amount of money you spend each month
- The amount of money you have left over each month
You may learn that some of your spending habits, like stopping for coffee a few times a week, build up to a lot of money. There are ways to help you make choices that align with your money map, like:
- Only using cash to make purchases
- Using your credit card for emergencies only
- Arranging your money into specific envelopes according to your budget
Remember — this is a learning process and it will take time to improve these life-long skills.
Resources
Words to know
Action step 3.
Establish credit.
Everybody has a credit score — a number between 300 and 850 that represents how much a lender trusts you to pay your debts on time. The higher the score, the better you look to potential lenders and the more likely you are to receive a loan or credit card.
Good credit will be helpful for many different things in your financial future, from obtaining loans and buying a car to renting an apartment.
There are two types of credit: revolving credit (like credit cards) and installment credit (like a loan). You can begin to establish good credit in multiple ways:
- Being added as an authorized user on your parent's credit card
- Opening a credit card and making on-time payments to your balance
- Making on-time payments to a loan, like a car loan or student loan
Remember, never spend more on credit cards than you are able to pay back and always have a plan on how to repay your debts. Credit cards are not ‘free’ money — you might get charged high fees if you don’t pay off your balance every month.
Resources
Words to know
Action step 4.
Start planning for retirement.
It is important to explore your options for saving for retirement as early as possible. Start to work with a benefits counselor, job coach, family member or financial professional to discuss your goals for retirement and lay out the steps you need to take to reach those goals. You may determine a certain amount of income or benefits you need to set aside each month.
If your employer offers a retirement savings plan, such as a 401(k), try to contribute to that plan as much as you can. Your employer might also have a pension plan option for you to consider. You can also start an Individual Retirement Account (IRA). Be sure to understand how these accounts will impact your Social Security and other benefits, if you are eligible.
Retirement may seem far off, but it is never too early to start learning about what options are available to you. Planning for the future early on will allow you to live the life you hope for when you are no longer working.
