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Money Advice for Young Professionals

March 1, 2012

By: Jim Oosterman
Melrose Bank

Having just graduated with a college degree, young people will begin looking for and landing their first full-time job. Finally comes the opportunity to be more independent. You will have your own income, will be paying your own bills and will soon venture out of your parents house to live on your own. For most, this freedom will be a dream-come true. But these young professionals may not be fully prepared for adulthood. Most are not used to managing their finances alone and therefore may make poor financial decisions. Too often young people get carried away with their purchases and forget that they now have new responsibilities they didn’t have before. Before long, they may be struggling financially. This doesn’t have to happen. Here are some things you can do to ensure it doesn’t.

Understand Your Financial Position
Young professionals need to be aware of their complete financial position. Start with your annual income, both before and after taxes. Determine the fixed monthly expenses you will owe such as rent, utilities, car payment and insurance. Next, look at how much you may be spending on other essentials, such as groceries, personal care, vacations and entertainment expenses. If you are finding your budget to be tight, the nonessentials are the first expenses you should look to cut back on.

If you have any outstanding debts, such as student loans or credit cards, you should pay a determined amount towards these expenses each month as well. Add in the interest due and you will be looking at even more money. If you can cut back on the unnecessary expenses, you will have more available to put towards your debts so that you will not be building up unnecessary interest. It would also be beneficial for you to fully understand your employer’s 401k plan to be sure that you can invest some funds there as well. It’s never too early to start saving for retirement.

Develop a Plan of Action
After you have analyzed your financial situation and have a better understanding of how much of your income will be used immediately to pay off any fixed expenses and how much you will actually get to keep, it’s time to devise a plan that will allow you to stay in control of your finances.

Setting a budget is essential. You can plan a weekly or monthly budget, depending on which you prefer. Calculate your fixed expenses and other necessities you will need each month.

To help you stay in control of your debt, reduce your credit card usage, or eliminate it completely. Unless you have factored monthly credit card payments into your budget, there is a good chance that the credit card debt will increase each month, leaving you in an undesirable position.

If you have the time, take on a part-time job. This doesn’t have to be your typical “college job”—many people don’t realize that they have valuable skills that other people are willing to pay for. You could teach a language, arts and crafts class, help with editing, or assist someone with computer programs. The extra cash will give you additional job security and could potentially lead you in another successful career direction.

Start Saving Now
The most important piece of advice: start saving now. It is a smart idea to set aside a small amount, such as 10%-20% of your income, in a separate savings account. If you set aside 10% of an annual $30,000 income, you can save about $60 a week, which will quickly add up. Consider using part of these savings as an emergency fund for unexpected situations. It’s best to have cash available equal to at least three months worth of expenses.

In addition to an emergency fund, it’s equally important to begin a retirement fund. If your company offers a 401k plan, sign up at your first opportunity. If no such plan exists, divert some of your paycheck into an IRA. You don’t have to save a large amount each month. Even if you invest just a small amount each month you can have a substantial sum by the time you retire. This money will be extremely important to you when you’re older, so make it a priority to start saving right now.

These financial tips will help you get started on the path to independence. As a non-financial related piece of advice, remember that hard work pays off. Putting in the effort to land the right job, getting the promotion you’ve been waiting for, or saving up enough to take a much needed vacation are all goals that take time to attain. Reaching your goals, whatever they may be, will give you a sense of accomplishment that can’t be replaced.

James Oosterman is the Vice President of Melrose Bank. He can be reached by telephone 781-665-2500, online at or on Facebook at

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