Everyone has their own list of the top 10 financial decisions a young professional should make so I wanted to share mine. This comes both from experience as well as many articles I’ve read on the subject. If you’re just starting off in the workforce, here are some financial decisions to keep in mind.

1. Choose a job that you love – and if you don’t love it, find another job.

I count this as a financial decision because this could lead to a lot of differences in your finances later on. If you love your job, not only will you work harder at it thus increasing your chances to succeed and incidentally make more money, but you will also be more satisfied with your life. This leads to not needing as much materialistic things and therefore, increasing your net worth.

Okay, that might be an unrealistic description but really, you will be so much happier if you have a job you love. I’ve seen many people enter the workplace and not like their job – but not realize they should move on. Coming from school, you tend to think that you’re “stuck” because you made a choice to be there but you don’t have to be.

If there aren’t any huge problems that are making you miserable, give it a year or two. If you still aren’t happy, move on!

2. Create a realistic budget

Once you have a job, you’ll know how much income you can expect per month. After a month or two, you’ll also know how much your recurring bills will be. I’ll write a post soon explaining how I created my budget but for now, here’s a simple plan:

• Sum up all of your necessary bills (water, electric, etc). These are your needs.
• Sum up all of your unnecessary bills (cable, Netflix, gym, etc). These are your wants.
• Subtract the first two totals from your monthly income. You should still have some disposable income left as well as be able to save a little. If you can’t, shave some off of your wants – or needs if you have to.

Told you it would be a simplified plan.

3. Choose a place to live that is within budget

Hopefully, you’ve already done this. But in case you just calculated your budget and realized that you can’t afford the place you’ve been living in since college – or you just want to move out now – it’s time to figure out how much you can afford. A good rule of thumb is that you should be spending less than 25% of your take-home monthly pay on your rent or mortgage payment.

4. Automate your bills as much as possible

Once you figure out what all your bills are, automate them as much as possible. If you’re comfortable with it, set your electric, gas, cell phone, etc. bills to all be automatically withdrawn from your account. Personally, I don’t like this because I like to see how much my bill fluctuates every month.

I “automate” it by setting a monthly reminder in my calendar and having a separate folder with all my bills bookmarked. When that reminder goes off, I click through each bill and pay it right away – because of course, you should only be spending what you can afford.

5. Automate a savings plan

Now that you have your budget set up, it’s time to start saving! I recommend using ING (feel free to e-mail me if you’d like a referral link). They have a great automatic savings plan you can set up and just have money transferred weekly/bi-monthly/whenever you get your paychecks to targeted savings accounts.

6. Contribute the max to a 401K to get the employer match

If your company offers a 401K and the company will match a certain percentage, this is the best retirement plan you can do. Basically, it’s free money! Always at least put in the minimum needed to get the maximum match. For example, my company offers a 4% match if I contribute 5% of my income. So of course, I set my paychecks to take out 5% before I even get it and put it in my 401K. Since I never see it, it makes it easier to deal with – plus, I know I’m getting extra money contributed by the company.

7. Open a Roth IRA

Once you contribute to your 401K, the next step to ensure you’re set for retirement (the best time to start planning for this is as a young professional), it’s time to open a Roth IRA. I’ve talked before about my reasons for opening one and there’s a lot of good information out there about why you should have one.

8. Figure out a payment plan to pay off all debt

Chances are you have student loan debt. If you don’t, congratulations but I hate you right now. A great way to be able to do #1 (find a job you love) is to not have to feel like you are completely dependent on your salary. Therefore, you should strive to be debt-free. Student loan debt might seem like a lot but break it down. Figure out which are your high interest loans and if you can consolidate them to get a lower interest rate. Calculate how long it would take before you are rid of that debt if you keep paying the minimum payment – or if you bumped your payment up a little. Create a plan and stick to it from the very beginning when you have to start paying it back. It’ll make it easier to feel like that’s the “necessary” amount to pay.

9. Understand credit card debt – and why it’s important to not have any.

Start living by the mentality: if you can’t afford it, don’t buy it. I’ve known a lot of people who will start putting things on credit cards just because they can – and then be horrified at the repercussions of having to pay all of that back. This can keep you in debt for years to come (see #7) with extraordinary high interest rates – not to mention the hit your credit will take.

If you have extenuating circumstances (e.g. medical problems), look into other options. If you have to take out a personal loan, that still most likely will be a better option than trying to put those bills on credit cards. Find something with a low interest rate that you can pay back in a reasonable amount of time.

10. Don’t limit yourself too much.

I know they say the mentality of “you’re only young once” is bad but that’s easier said than done. Sometimes, you just really want to take that vacation to Cancun or that cruise through Mexico. And as long as you have a budget (see #2) and can afford it (#8), sometimes you just have to splurge on yourself. It helps keep you motivated to work harder and do better so you have the financial means to do these things in the future.

It’s true, you’re only young once. However, it’s not an excuse to be financially irresponsible. If you make the right financial decisions, you can still spoil yourself and enjoy finally making money – instead of just having student loans to live off!

These are some heavy rules to follow but, over time, they are something to strive for. Do you agree that these are important financial decisions to make? What have you done so far that’s on the list? Do you have any other rules that should be included?