So, You’ve Graduated! Now What?

You just stepped out into the adult world with your degree - woohoo! Now what?

First of all, congratulations 💚 All of your hard work over the years has paid off and you should be beyond proud of yourself for your accomplishments.

We hope you feel the thrill and freedom of graduating, and are excited for your next steps (whether that be starting a new job, moving to a new city, going to graduate school, or taking a break, etc.).

But let’s face it, “adultinghas a pretty bad reputation and entering the “real world” can feel quite overwhelming. Realistically, you do know how to be an “adult”. All of the lessons you’ve learned over the last 20-something years of your life add up to now. You might’ve just forgotten that you know them.

Relax a little... Debbie is here to give you some powerful financial tips to ease your transition into your next journey 💪

Graduation Pack

You Need A Budget  🔑

The key to financial stability is a budget. By tracking your expenses and income while following a plan, you build a strong financial foundation for both day-to-day life and the long-term.

Here are some reasons why you really need a budget:

  • Helps you figure out your long-term goals and work towards them
  • Stops overspending
  • Makes it easier to save
  • Allows you to be flexible
  • Identifies bad spending habits
  • Prepares you for emergencies

Many people associate a budget with a lot of hassle and headaches, but really budgeting helps you gain a feeling of control over your money. Budgeting can be quite reassuring by knowing that you have a plan. When you have a budget that reflects your personal values, it can make a large contribution to your general happiness.

Freedom and “adulting” is all about taking responsibility for yourself and working towards your goals. Budgeting allows you to do so by putting the power of your financial health in your own hands.

Not sure where to get started with your budget? Check out these suggestions ⬇️:

Taxes 🥴

TAXES! Woohoo! One of your newfound responsibilities is accurately reporting and paying income taxes on time. Sounds like fun? Don’t worry... it’s not as hard as it sounds.

Income Taxes

It’s important to have an idea of what your income is being taxed so that you can budget accordingly. When you’re filing out your W-4, you’re determining how much federal taxes will be withheld from your paycheck based on your circumstances (income, investments, deductions, etc.). Your employer sends the money that is withheld from your paycheck to the IRS, alongside your name and social security number. Depending on the way your employer calculates this number, you may get a tax return or owe taxes when you file (so save that $ 😉).

Generally speaking, there are 7 tax brackets that you can fall in based on your income. Find your bracket and take note of the amount you are likely to owe.

Tax Rates

Bonus Taxes 💰

Working hard deserves a reward, and along the way hopefully you will receive a bonus. You might’ve already received a relocation bonus / signing bonus. But how is that taxed? Let’s take a look.

While bonuses are subject to income tax, they are not withheld with the rest of your income. Instead they count as supplemental income. Bonuses are withheld federally at a rate of 22%.

Example: Let’s say your relocation bonus is $6,000. You’ll likely have $1,320 withheld in federal taxes and sent to the IRS ($6,000 x .22 = $1,320). So don’t go crazy on furniture shopping 😉.

Deductions ➖

If you’ve taken out student loans, the good news is that student loan interest is tax deductible unless you make over $70,000 a year. You could qualify for up to $2,500 in tax deductions on the interest you pay each year, so make sure you look into it while you’re filing taxes 👀.

How Do I File Taxes 🤔

Now that we’ve broken taxes down, how do you file taxes? Thankfully, there are ways that make it quite easy to file taxes now.

Make sure you stay on top of tax deadlines (mid-April), or file for an extension if needed.

Read Debbie’s “Tax Day” blog for more info!

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Student Loan Repayment 💸

Paying down your student loans is a daunting task. Good thing is, the government has released one of the largest student loan forgiveness packages ever (around $2bn), so it's time to check your eligibility. Check out these  4 things you can do to pay down your student loan debt quicker, cheaper, and with less stress.

1. Set up auto-pay directly on your servicing platform or through a payment app:

Setting up auto-pay is one of the best things you can do to make sure your student loan payments are on auto-pilot. Besides Navient (the largest student loan servicer), or Myfedloan, you can also download a student debt payoff app. ChangED and Chipper allow you to track your loans and round up your expenses to the nearest dollar, and put the change towards your loan.

2. Refinance your student loan if your interest rate is high:

If you're paying an expensive private loan (7% interest or above), consider refinancing your student loan to a lower rate (5% or lower). Here are a few companies that offer student loan refinancing - we would compare rates between all of them:

  1. Earnest
  2. Sofi
  3. Juno
  4. LendKey
  5. CommonBond
  6. Laurel Road
  7. Splash Financial

3. Check eligibility for student loan forgiveness:

With the new student loan forgiveness package, Chipper (mentioned previously) should be able to identify your eligibility under the plan and help you apply for debt cancellation.

4. Set up an income-driven plan:

If the monthly payment is a bit much for your budget, you can set up an income-driven plan where your monthly payment is tied to your income (i.e. the smaller your income, the smaller your monthly payments but the longer the timeline). In times when you're unemployed, you will owe $0, though you will still continue accruing interest. This option provides more flexibility and accommodation to your unique employment needs, but can also mean delayed payoff.

Benefits 💪

With all of your hard work at your new job, it’s time to reap the benefits (pun intended). Let’s break down some of the common benefits companies offer, and what they mean for you.

Health Insurance 🩺

Chances are, you’ve been on your parents insurance plan growing up or one through your university. If you’re under the age of 26, you are able to stay on your parents insurance plan even if insurance is offered through your employer. But should you? Let’s take a look ➡️

First, check the deductible of both plans. Dependent on your health conditions, you can take a pick. Plans with higher deductibles have lower monthly fees, but higher costs for doctors visits and prescriptions. Sometimes, if you have a high deductible plan you will be given an HSA card that can be used for these expenses. If you visit the doctor frequently, or have underlying medical conditions, it’s better to remain on a low deductible plan.

Second, compare the additional cost of being on your parents plan vs. the cost of getting your own plan. Some plans charge different rates for “adult children”, while others rates can drastically differ depending on the number of people on the plan.

Finally, make sure you keep track of deadlines on when you are eligible to sign-up for different healthcare insurance plans. Employers usually have an open enrollment period each year where you have a few weeks to sign up for health insurance for the first time.

401K 💰

Saving for retirement 😎... we think YES. With a 401K plan, money is deducted from your paycheck before you have the chance to spend it and tucked away for retirement. Another benefit of 401K’s is the “company match”. The rate of what employers match varies by company, but essentially it is between 3-6% (free money). Participating in a 401k plan also means tax advantages. The money inside your plan grows tax deferred 💚.

Paid Vacation & Sick Days 🤒

Everyone gets sick at some point, or just needs a nice vacation. Most employers offer 10 days of paid time off (PTO) for these cases. Check your company policy and see if these roll-over. If not, use them up - or if so, save them up!

Credit Score & Credit Building 💳

How Is My Credit Score Determined?

Your credit score is made up of 5 variables.

  1. Payment History: Making sure you don't miss payment obligations or have bills going into collections
  2. Age of Credit History: The longer the average age, the better. Closing your old accounts will decrease your average age, hurting your score. It is always better to improve your standing with old accounts than to consistently open new ones.
  3. Credit Card Utilization: The percentage of your credit line you are utilizing. The lower the better, though 0% utilization won't help you build credit. We recommend staying under 15%, though you should use 30% as a hard limit
  4. Hard Inquiries/ New Credit: Opening new credit accounts will typically have a short-term negative impact, as they exhibit credit-seeking behavior. We wouldn't worry too much about this unless you are trying to take out multiple loans at the same time.
  5. Total Number / Mix of Credit Card Accounts: Having a mix of accounts (mortgage, student loan, credit card) improves your score. More accounts is actually good for your score, but is less manageable; this is one of the ways credit scores are actually not consumer-friendly. We recommend having somewhere between 10-20 throughout the life of your credit file - not all of them need to be active or used at the same time. It's normal to have 3-5 active accounts at once.

How Can I Improve My Credit Score? 📈

There are lots of new ways to build up each of these categories nowadays, without taking the long, hard road of paying down your debts one by one or hiring an expensive credit repair service. Being good with your payments long term is definitely critical, but here are some shorter term strategies to consider (in order of our most to least favorite):

1. Check Your Credit Score:

Signing up for Credit Karma is easy and free, and will not only give you monthly updates on your credit score, but will break down your progress in each of the previous 5 credit categories mentioned. Understanding your own situation is the first step to building a credit improvement plan.

2. Pay off Debts Strategically:

Credit bureau reporting often lags your actual payments by about a month. By paying off your balances more often, even if you break them up into smaller amounts, they are reported to the bureau in time for you to see the credit lift. Try paying half your monthly balance in the middle of the month and the rest at the end.

3. Get a Credit-Building Debit Card:

If you've been burned by credit cards and feel yourself unable to manage them, but also feel that debit cards don't offer any value, consider a credit-building debit card. This is a super innovative and totally new financial product - most of them charge a monthly fee, but it's typically far less than the annual fees you pay for the best credit cards. We recommend you check out the ones below:

  1. Extra App
  2. Zoro Card

4. Ask for a Credit Limit Increase:

Because credit utilization is measured as a percentage of your total credit limit, asking for an increase maybe be helpful in bringing your utilization down if you continue to spend the same amount each month. This can be risky as we have been known to be tempted to use the newfound limit

5. Report Rent Payments, Subscriptions, or Other Bills to Credit Bureaus:

There are plenty of tools today that allow you to report expenses that wouldn't otherwise go on your credit report.

- Experian Boost: Reports utilities, subscriptions, and phone bill

- Esusu Rent: Reports rent

- Rental Kharma: Report rent

- LevelCredit: Report rent, cell phone, and utility

- GrowCredit: Report subscriptions

6. Try a Secured Credit Card:

If you are looking to start on your first credit card, there are several that approve fairly easily. Petal, Capital One, and Amex all have cards that are fairly easy to get started on without a credit score.

As for secured credit cards, they typically come with a required deposit and your limit usually equals this amount. You can't earn interest on this amount while it's in there, and you still pay interest as you would with a credit card. The one exception is the Chime Credit Builder card - which you can consider if you're already a Chime customer.

7. Dispute Errors on Your Report:

Always make sure to check your account for strange or fraudulent account activity, as sometimes creditors do not report properly. Make sure to file disputes with all of the major credit bureaus below

  1. Equifax
  2. Experian
  3. Transunion

8. Pay Off Collections:

Collections can have an extreme negative impact to your credit score. Try not to let things go to collections, but if they do, do not avoid the collections agency. They typically will negotiate your bill as well if you push them.

Ok.. that was a lot. If you have any questions, don’t hesitate to Ask Debbie!

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Now that you’ve made it this far, AND if you’re one of the first 100 people to do so, fill out this type-form to get a Debbie adulting pack (a budget book and a surprise 😉). Make sure you're on Debbie waitlist to qualify for the offer!

T&Cs: No purchase necessary. Ends 5/30. US only, 18+. Must be one of the first 100. Debbie waitlist required.

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

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