Money management guide to financial independence

November 17, 2021

Learn the basics of handling your own money matters so you can conquer your financial future with confidence.

 

Whether you’re just graduating college, moving out of your parent’s house or starting your first full-time job, it will soon be time to handle your finances on your own. To help, we’ve pulled together this guide, designed to give you a clear picture of all the essentials. Learn about each of these five money matters to ensure you have all the information you need on your path to financial independence.

 

Money management tip 1: Understand income taxes

When you land your first job after graduation, it can be tempting to equate your salary or hourly compensation as your total income. But before you start mentally spending that amount, remember that the state and federal governments require a certain percentage in the form of taxes.

If you work for a company, they’ll likely take tax money out before they pay you. If you’re an independent contractor, you’ll need to take care of taxes on your own. This part is very important: Pay your taxes quarterly. Four small payments are much easier to manage than one huge yearly sum.

No matter how you get paid, you’ll need to file annual taxes by April 15th like the rest of the country’s wage-earners. There’s a penalty if you’re late. You can do your own taxes, or, if your financial situation is more complicated, you can use a tax software program or an accountant.

Stay informed to help reduce your current and future tax burdens. Visit our tax strategies page for more info.

 

Money management tip 2: Start saving for long-term financial goals

You’ve probably heard the phrase, “Pay yourself first.” Make it a top priority to automatically shuffle a chunk of your income into your savings monthly, before you have a chance to use it for something else.

How much should you save? Roughly 20 percent, 10-15 percent of which should be retirement savings. Use at least some of the remaining five to 10 percent to build up an emergency fund, which should generally be three to six months’ worth of your bare-bones living expenses that can allow you to weather tough financial times without asking for parental help.

Channel whatever’s left toward a long-term financial goal, such as a vacation, wedding, home or vehicle.

 

Money management tip 3: Make a budget

Your monthly spending should not exceed your monthly income. This sounds simple enough, but unless you’ve taken the time to calculate exactly what you’re making and spending, you might not know how those numbers compare.

Add up one month’s spending, including rent, utilities, savings, investments, groceries and gas. Make sure every expense is accounted for. Budgeting apps are a convenient way to keep track of your purchases, but a good old-fashioned notebook works, too.

Be aware of paying for needs first and wants second. When you’re saving for a vacation or another splurge, that second category may need to shrink for the sake of your long-term goal.

 

Money management tip 4: Be careful with credit cards

Here’s the thing to keep in mind about credit: It’s important to demonstrate that you can manage it well for potential lenders you may need to help you fund a car, home or business in the future.

Consider opening a credit card, and just use it to pay for things that you can afford – not to finance those you can’t. Pay it off in full and on time each month, and watch your credit score tick upward.

Remember, whatever you don’t pay off at the end of the month will still be there waiting (plus an interest charge) the following month. Do everything you can not to carry a balance, which can snowball quickly. Examine your budget for areas to cut back on instead.

If you find yourself in uncertain financial times and you're unable to make monthly payments, reach out to your credit issuers to see what remedies are available to you.

 

Money management tip 5: Insure yourself

Insurance can be a hard responsibility to appreciate at first. The tradeoff for your monthly payment isn’t something you can see or watch grow. It’s more about the peace of mind that if something unexpected happens, you’ll be financially equipped to handle it.

When it comes to vehicle insurance, shop around until you find the best fit for your needs and budget. You’ll want to do the same for health insurance, too, if your employer doesn’t provide it.

It’s also smart to consider life insurance. Buying when you’re young and healthy locks you into a low rate. That could well be in the double-digits monthly, depending on type and coverage, if you’re a healthy 20- or 30-something. Inexpensive and responsible – now that’s financially intelligent.

 

Need help with your transition to financial independence? Make an appointment with a U.S. Bank personal banker.

Related content

Military homeownership: Your guide to resources, financing and more

For today's homebuyers, time and money are everything

Crypto + Homebuying: Impacts on the real estate market

Insource or outsource? 10 considerations

Money management guide to financial independence

Webinar: Mindset Matters: How to practice mindful spending

How to financially prepare for a military PCS

Webinar: ESG for Corporations: Building an all-weather, long-lasting strategy

Financial checklist: Preparing for military deployment

Common pitfalls to avoid in the equipment financing process

The secret to successful service provider integration

Consolidating debts: Pros and cons to keep in mind

Webinar: Smart habits and behaviors to achieve financial wellness

What I learned from my mom about money

Take the stress out of buying your teen a car

I own two electric vehicles. Here’s what I’ve learned about buying and driving EVs.

How I did it: Deciding whether to buy an RV

Car shopping Buying versus leasing your next vehicle

Questions to ask before buying a car

What you should know about buying a car

Improving your credit score: Truth and myths revealed

How I did it: Turned my side hustle into a full-time job

How to get started creating your business plan

Talent acquisition 101: Building a small business dream team

Make your business legit

7 tips to help grow your business after launch

How to test new business ideas

Costs to consider when starting a business

How to establish your business credit score

How to redefine challenges with business collaboration

How to sell your business without emotions getting in the way

5 steps to take before transitioning your business

10 tips on how to run a successful family business

The costs of hiring a new employee

How to expand your business: Does a new location make sense?

How to choose the right business savings account

Does your side business need a separate bank account?

How to build a content team

Finance or operating lease? Deciphering the legalese of equipment finance

Buying or leasing? Questions to ask before signing a contract

Safeguarding the payment experience through contactless

ABCs of ARP: Answers to American Rescue Plan questions for counties

Should you buy a house that’s still under construction?

Unexpected cost savings may be hiding in your payment strategy

COVID-19 safety recommendations: Are you ready to reopen?

Start of disclosure content

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, home equity and credit products are offered by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association. Member FDIC.

U.S. Bank is not responsible for and does not guarantee the products, services or performance of U.S. Bancorp Investments, Inc.