To continue enjoying all the features of Navy Federal Online, please use a compatible browser. You can confirm your browser capability here.

Bottom Line Up Front

  • Setting up a budget is the first step toward responsible spending and saving. You’ll be able to keep track of your spending and avoid financial surprises.      
  • Saving for the long term and choosing the right insurance plans can help protect yourself from unexpected expenses and debts.
  • Using credit cards responsibly means always making monthly payments on time and—if possible—in full, to avoid accumulating interest.

Time to Read

8 minutes

December 21, 2023

Part of adulting is taking care of your personal finances. We know, it can seem like a tall order. There's no better time than now, as you set out on your own, to understand certain financial concepts like budgets, savings and responsible credit usage. 

Managing your personal finances might seem daunting, but it’s a lot easier than you’d think. By starting early, you’ll be in great shape when it’s time to graduate—or to retire. Here’s what you need to know to start your post-college finances off on the right foot. 

Budgeting 101: How to Set and Implement a Budget

Once you start a career and are earning steady paychecks, you may feel like you have all this new income to spend on things you’ve wanted. However, before you get to the fun stuff, the monthly bills need to be paid—rent, groceries, utilities, etc. You may even need to budget for subscription services and gym memberships. While these may seem like minor expenses, they can add up quickly. With just a few streaming services, you can quickly end up spending close to an extra $100 per month! 

Creating a budget is the first step toward responsible spending and saving. Budgeting helps you take control of your finances. It allows you to track your income and expenses, ensuring you don’t spend more than you earn. This means fewer financial surprises and less stress.

A good budget helps you achieve your financial goals, whether that's a spring break trip or simply saving for rainy days. A budget also acts as a safety net, helping you avoid the dreaded spiral of debt. You’ll know when you can splurge a bit and when you need to tighten your purse strings.

What to include in your budget

Setting up a budget is easier than you might think. Essentially, you’re comparing the money you bring in to the money going out. Then, depending on your income, expenses and goals, you can adjust your spending accordingly.

Here’s what to include:

  • Income. List all sources of income. This includes part-time jobs, scholarships, allowances and freelance gigs. Be sure to use your net income—what you take home after taxes. If you’re working as an independent contractor, you’ll need to set aside money for tax purposes.
  • Expenses. Categorize your expenses into fixed and variable. Fixed expenses include items like rent, tuition and cell phone payments. Variable expenses might include groceries, entertainment, transportation and discretionary spending.
  • Savings. Get in the habit of paying your savings account like a bill. It helps create a lifelong habit and gives you a cushion for the inevitable blown tire, veterinary bill or leaky water heater.
  • Debt repayment. If you have student loan debt, a car loan or credit card debt, include a section for debt repayment. Paying off high-interest debt should be a priority.

Popular budgeting methods

There are several types of budgeting methods you can use. You may need to try multiple versions before you find a method that works for your lifestyle.

  • 50/30/20. Allocate 50% of your income to needs like rent and groceries, 30% to wants and 20% to savings and debt repayment.
  • Envelope method. Assign a specific amount of cash to different spending categories and keep the money in envelopes. For example, if you allocate $100 for dining out each month, you’ll only use money from the “dining out” envelope. When an envelope is empty, spending is over for that category until next month.
  • Zero-based budgeting. In this method, every dollar you earn has a purpose. You’ll allocate all your income to expenses, savings or debt. This ensures your budget balances to 0 each month.

There are many budgeting apps and online tools that can help you automate your budgeting process. Some of them use these budgeting methods. Others may use different methods to track and analyze your spending, so you can make sure you’re staying on track. If you prefer to track your spending manually, use Navy Federal’s Monthly Budget Worksheet.

Budgeting tips and tricks

Once you’ve set up your initial budget, you’ll want to use it for a month or so to develop good habits. Here are a few ways to stay on track:

  • Set clear goals. Define your financial goals. Are you saving for a trip, paying off debt or building an emergency fund? Having specific goals will give your budget purpose.
  • Track expenses. Keep a record of every expense, no matter how small. This helps you understand where your money is going and identify areas where you can cut back.
  • Start simple. If you're new to budgeting, begin with a basic budget. As you become more comfortable, you can add complexity and detail. The most important thing is to avoid overspending.
  • Cut back. Identify non-essential spending and cut back. This might mean cooking at home more often, canceling unused subscriptions or using student discounts where you can.
  • Plan for unusual expenses. Don't forget about irregular expenses like car maintenance, home repairs or holiday purchases. Set aside money in advance for these situations.
  • Avoid impulse spending. Give yourself a cooling-off period before making large or impulse purchases. You might find that after a few days, you don’t want to spend money after all. Leave things in your online shopping cart and see if it still brings you joy 48 hours later.
  • Use cash as fun money. If you tend to overspend with credit cards, consider using cash for expenses like dining out or entertainment. Once the cash is gone, you’re done spending—just like in the envelope budgeting method.
  • Review and adjust regularly. Your financial situation and goals can change. Review your budget periodically and make adjustments as needed.

Tips for Creating a Basic Savings Plan

Creating a savings plan can set you on the path to financial independence and security. You should set up your savings plan as part of your monthly budget. Here’s how to make it successful:

  • Know your goals. Just like with your budget, you’ll need to consider why you’re saving. Defining your goals will give you a clear sense of purpose for your savings plan.
  • Make room for savings. Once you’ve covered your essential expenses, allocate a portion of income—whether from a job or gifts from family members—toward savings. A commonly recommended amount is 20% of your income. If you can save more, that’s even better. However, no savings amount is too small. Your savings should go toward both short-term and long-term goals.
  • Open a savings account. To make saving easier, open a dedicated savings account separate from your checking account. Look for an account with no or low fees and a competitive rate. Having a designated savings account will help you resist the temptation to spend the money you’ve set aside. For long-term goals, consider accounts with higher rates—but recognize that you might not be able to access those funds for longer periods of time. 
  • Automate it. Set up automatic transfers from your checking account to your savings account on the day you receive your paycheck. This ensures that you consistently save without having to think about it.
  • Prioritize an emergency fund. Aim to save at least 3 to 6 months’ worth of living expenses in an emergency fund. This fund will serve as a financial safety net in case of unexpected events like medical bills or job loss.

Like with your budget, you’ll want to review and adjust your savings plan every so often. For example, if you get a pay raise, you can save money faster by increasing the amount you contribute to your savings account. On the other hand, if you lose your job, you may have to dip into your emergency fund to make ends meet.

Understand Loans and Credit Cards

Once you graduate, it’s normal to have some form of debt. Loans and credit cards can be powerful tools when used wisely, but they can also lead to financial pitfalls. Understanding interest rates and compound interest is essential to making informed financial decisions. It’s also important to understand how to pay down any accumulated debt quickly.

Interest rates: The cost of borrowing money

Interest rates are fees that lenders charge you for borrowing money. These fees are typically a percentage of the principal amount (the money you borrow). Interest rates play a central role in loans and credit cards. When you understand the concepts below, you can see how interest rates will affect your finances.

Loans and credit cards can have fixed (unchanging) or variable (fluctuating) interest rates. Fixed rates offer predictability, while variable rates can change with market conditions. An annual percentage rate (APR) includes the interest rate as well as additional fees. This is the “true cost” of borrowing. When comparing financial products, always pay attention to the APR.

Some debt uses a form of interest accrual called compounding (or capitalizing) interest. Compound interest adds the interest earned or paid to your principal loan balance. It can work for or against you:

  • Compound interest on savings. When you save or invest, compound interest helps your money grow over time. The longer your money compounds, the greater the growth.
  • Compound interest on debt. When you carry debt, compound interest could lead to your balance spiraling out of control. Interest accrues not only on the principal but also on any unpaid interest. This is why it’s important to pay down debt as soon as possible.

Responsible credit card use is key

While credit cards offer convenience and benefits like rewards, mismanagement can lead to debt. If you don’t pay your balance each month, you’ll quickly learn how compound interest on debt can get out of control.

Here are some tips on how to use credit cards wisely:

  • Stick to your budget. Track your credit card spending and ensure you can pay your credit card balance in full each month.
  • Pay on time. Always pay at least the minimum payment by the due date to avoid late fees and damage to your credit score.
  • Avoid cash advances. Cash advances on credit cards often come with higher interest rates and fees, making them costly. 
  • Understand credit scores. Your credit score is how lenders decide whether you’re a “good risk.” This takes into account whether you pay a balance on time, how much credit you use per month and more. The higher your credit score, the more likely you’ll receive lower interest rates and other benefits. 
  • Know your limits. It’s important to understand credit limits. Your credit limit isn’t your spending limit. Stick to your budget. Spend a reasonable portion of your limit to maintain a healthy credit utilization ratio.

Strategies to pay down debt

If you’ve accumulated debt, don’t panic. There are plenty of strategies for paying it down:

  • Snowball method. Pay off your smallest debts first while making minimum payments on others. As each debt is paid off, roll the amount you were paying into the next debt.
  • Avalanche method. Focus on high-interest debts first to minimize the total interest paid. Pay the minimum on other debts until the highest-interest loan is paid off.
  • Consolidation. Consider consolidating multiple debts into a single, lower-interest loan. Or, use balance transfer cards with promotional 0% APR offers.

The methods above can help you get back on track. To speed up the process, find ways to boost your income, such as freelancing or getting a part-time job. Cut unnecessary expenses to allocate more money toward debt repayment.

Protect Yourself by Finding the Right Insurance

Insurance can help cover unexpected costs, such as stolen cars, natural disaster damage and health emergencies. Here are 3 types of insurance you should consider before you graduate:

  • Auto insurance. Car insurance protects yourself and others in case of accidents, damage or stolen vehicles. Full coverage—including liability, collision and comprehensive—is generally recommended. Discuss options and discounts with an independent insurance agent (or your parents) to find the best rates.
  • Renters insurance. If you’re living off-campus and not at home, you might benefit from renters insurance. This covers your belongings and provides liability coverage in case of accidents.
  • Health insurance. While you’re young, health insurance may not seem necessary. Unfortunately, accidents happen every day. This insurance helps cover medical expenses in case of illness or injury. If you’re not covered under your parents’ plan, find out if your college offers discounted plans for students.

While you’ll have to factor insurance premiums into your monthly budget, the right insurance can protect you from financial challenges.

Plan for Your Financial Future

Even before you graduate, it’s never too early to start planning for 2 things: paying off any student loans and saving for retirement. These financial hurdles might seem a long way off, but early preparation can set you up for the most success. Then once you’ve started your career and are receiving income, you can begin your repayment plan.

Student loan repayment

Student loan payment plans determine how you’ll repay your student loans. They can significantly impact your budget and financial stability. If you have federal loans, there’s a 6-month grace period to get financially settled before you have to begin repayments, and there are several options available. 

  • One of the most popular is the Standard Repayment Plan, which spreads your payments evenly over a 10-year period. This provides a clear timeline and strategy for debt repayment. 
  • Graduated Repayment Plans start with lower payments that gradually increase over time, accommodating career growth. 
  • An income-driven repayment plan, such as the new Saving on a Valuable Education (SAVE) Plan, adjusts your monthly payments based on your income. This makes loan payments more manageable if your earnings are low initially. 
  • Finally, there’s the Extended Repayment Plan, which extends your repayment period beyond the standard 10 years. This usually lowers monthly payments but might increase the interest you pay. 

If you have private student loans, your loan repayment terms will vary depending on your lender. Look into your loan terms before you graduate and build payments into your budget.

Other plans may be available by the time you graduate, so be sure to stay informed. Your college may offer student loan literacy classes to help you understand your options.

Saving for retirement

Retirement might seem like a distant concept when you’re a college student, but it’s never too early to start saving for your future. In fact, the earlier you begin, the more time your money has to grow through compound interest

It’s a smart move to start your retirement savings journey while in college. By using retirement accounts like IRAs and taking advantage of employer-sponsored plans, you can set yourself up for a secure and comfortable retirement. Talk to a financial advisor at your school or through Navy Federal Credit Union to learn about other retirement savings options. 

Start Your Financial Journey With Navy Federal Credit Union

Now that you understand the basics, Navy Federal Credit Union is here to help you meet your financial goals. Browse our website to learn more about our checking and savings accounts, retirement options and more. Not sure which options are right for you? Stop by a branch or reach out online to find the right tools to build a successful financial future.

Key Takeaways Key Takeaways


This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.