Life is short, but it can feel pretty long if your finances are a mess and being debt-free is a pie-in-the-sky fantasy. Fortunately, we’ve assembled the top money moves you need to know for some of life’s big stages, from receiving that first paycheck to having a baby.
Keep reading to learn about the most important money moves for life’s biggest moments, including:
- Getting your first paycheck
- Paying taxes
- Moving to a new city
- Buying a pet
- Getting married
- Having a baby
Getting your first paycheck is incredibly exciting. What to do with all that cash? But before you go on a Rodeo Drive spending spree, you should consider some of these smart strategies.
1. Pay off your debt
If you have debt, one of your priorities should be paying it off. Selecting the best payoff method can give you a roadmap to debt repayment success. Here are three different options you can consider.
- Debt snowball: With the debt snowball method, you’ll pay off your debts in order of smallest to largest. You’ll make minimum payments on all of your balances but put extra money toward the smallest one. Once that’s paid off, you’ll focus on paying off the next smallest balance. The debt snowball method is good for people who need some more motivation on their debt payoff journey.
- Debt avalanche: With the debt avalanche method, you’ll still make minimum payments on all of your balances, but you’ll focus on first paying off the balance with the highest interest rate. Once that’s paid off, you’ll move on to the balance with the next highest interest rate. The debt avalanche method helps you save money on interest payments.
- Debt consolidation: With debt consolidation, you’ll take out a new loan—ideally with a lower interest rate—to pay off existing debts. Debt consolidation can simplify bill paying as well save you money in interest.
2. Create a budget
Now that you’re paying for items with your own money, it’s important to create and stick to a budget. A budget can help you avoid wasting money on discretionary expenses and focus more on the necessities. To create a budget, you should compare your post-tax monthly income against your monthly expenses.
Fixed expenses—like your car payment—stay the same every month, while variable expenses—like money spent on groceries and entertainment—may fluctuate. Compare your income against your expenses. If you spend more than you bring in, you’ll probably want to tweak what you’re spending money on.
3. Start an emergency fund
An emergency fund is money that’s set aside to help you on a rainy day, in case you need to cover unexpected expenses like medical bills or home repairs.
An emergency fund should cover about three to six months of living expenses, though a year is preferable. You can easily create emergency savings by putting a little money aside from each paycheck or setting up automatic deposits into a savings account.
If the phrase “Tax Day” sends a cold chill down your spine, you’re not alone. But now that you have a job and are making that bread, it’s time to get it together and file taxes. Here are 3 moves to help make it a little more bearable.
1. Organize your documents
No, bringing a shoebox of receipts to your accountant does not count as having your papers in order. Instead, try to categorize your papers in sections such as “donations” to avoid losing important paperwork.
2. Consider making an IRA contribution
In 2021, you can put up to $6,000 in either a traditional or Roth individual retirement account, or $7,000 if you’re 50 and over. Doing so might help you save in taxes and could be helpful if you’re straddling two tax brackets. The extra money might move you down you to the lower bracket, which can save you in both capital gains and income taxes.
3. Decide on standard vs. itemized deductions
Pick whether you want to take a standard deduction or itemize your deductions. A standard deduction is a flat amount which is taken out of your taxable income. Itemized deductions require you to list out deductions on Schedule A, which are in turn taken out of your income.
Common itemized deductions include:
- Dental and medical expenses
- Investment interest expenses
- Real estate mortgage interest
- Charitable donations
- Local and state taxes
Load up the moving van and prepare for an adventure. Moving to a new city can be incredibly exciting but also very expensive. Follow these steps to help keep your costs in check.
1. Get a sense of the cost of living
Knowing the amount you’ll need to have saved up prior to moving depends on where you’re headed. Some cities, like New York or San Francisco, are considerably more expensive than most other cities in the U.S. You’ll also want to consider income, state, local, and sales taxes and how they’ll affect your income.
2. Making a moving budget
You already created a budget once you started making your own money, but it’s also a good idea to set money aside for moving expenses. These can range from lower cost items like cardboard boxes to higher-ticket items like closing fees. Of course, professional movers will cost more than a DIY move. Your moving budget will vary depending on how far you’re actually going.
3. Increase your credit score
Your credit score is an important factor when renting an apartment or applying for a mortgage. The higher your score, the more favorable your rates will be and the more likely you’ll get approved. To improve your credit score, make sure to make on-time payments, maintain a credit utilization ratio below 30%, and dispute any credit report errors you might find.
Your sweet new four-legged addition is perfect for wet-nosed kisses and belly rubs. But pets can also be a pricey part of the family. Here are 3 moves to help you manage the costs of man’s best friend.
1. Budget for initial and continual expenses
Some costs you can expect to pay initially include spaying/neutering, microchipping, registering for a pet license, and other upfront costs like bowls, crates, leashes, and litter boxes. Expenses on a monthly or yearly basis include annual exams, medication, food, and grooming.
2. Research pet insurance providers
Pet insurance can help keep your pet safe. However, not all insurers are made equal. Be sure to look at different providers and premium rates. Keep in mind that you’ll pay more if your pet has a pre-existing condition, and younger pets will qualify for lower rates than older ones.
3. Create a pet emergency fund
Setting aside a pool of money for the unexpected can help you if you suddenly need to pay a large medical bill for your pet. Insurance sometimes doesn’t cover everything, so having a pet emergency fund set up can give you peace of mind.
Committing your life to someone you love is incredibly romantic. Credit scores and prenups? Not so much. But having some pragmatic money talks now can allow for a happy relationship later. Follow these moves for matrimonial bliss.
1. Have the money talk
Don’t ignore the green elephant in the room. Get the money talk done early instead of hoping that your cash issues resolve themselves (they usually don’t). Your agenda should include things like your financial goals, how you plan to share expenses, and how you’ll handle money management responsibilities.
2. Share credit scores
Your credit score is a three-digit number that signifies how likely you are to pay your loans on time. This score can determine big financial factors, like what interest rate you qualify for on your mortgage. The higher the score, the more favorable your rate. Since credit scores play such a big role in future finances, it’s important to talk numbers early on.
3. Talk about a prenup
Prenups, while not a particularly amorous or dreamy topic, can be a smart financial choice. If your relationship doesn’t work out in the long-term (look, we told you this wouldn’t be a romantic topic), your funds will be protected. This is especially important if you have more money than your spouse to-be.
Babies are big on cuteness AND expenses. If you’ve ever strolled through a store, you understand how astronomically pricey baby items can be. And don’t even get us started on childcare. Keep reading to find out top money moves to make for before you bring your new baby home.
1. Plan out parental leave
Look into your company’s parental leave policy. While federal regulations allow you to take 12 weeks of leave off when you have a baby, it doesn’t mean you have to get paid for the time off. If it looks like paid family leave isn’t in the cards, you can see if you can use vacation or sick days to help you get paid for at least a portion of the time.
2. Research childcare
Childcare can be expensive. You should try to find a good provider and set money aside to cover childcare costs ASAP. If possible, you can use a dependent care flexible spending account (FSA), which is an employer-sponsored pre-tax account you can use for qualifying expenses.
3. Start a 529 plan
Life beyond babyhood probably seems far, far away, but you should still consider setting up a 529 plan now. A 529 plan is a tax-advantaged savings plan that you can use for qualifying education expenses. Starting one today can give your money more time to grow, preparing you financially for your child’s education.
And there you have it—the money moves you need to make throughout your entire lifespan. Just follow our carefully curated roadmap to live the financial life of your dreams. Be smart with your money, but don’t forget to have a little fun along the way.
By Stefanie Gordon
Stefanie Gordon is a content strategist with over a decade of professional writing experience. She is a former financial journalist who has spent the last several years working in digital marketing. She specializes in content strategy and creation for large and small businesses in finance and technology.