Where’s your money going?

With a great paycheck comes great responsibility. Make sure you’re managing your money wisely.

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Your finances in college were probably a bit more simple than post-college — as long as you were making ends meet, you were good. But once you graduated, started earning an income, and paying back student loans (for some), expenses became much more complex. And while your hard-earned paycheck may provide some exciting financial freedom, it’s important to keep your bank account in mind so you’re spending — and saving — wisely.

Here are three important pieces of advice to consider as you establish your post-grad money flow.

1. Don’t start from scratch

The first tip of monitoring your money is to utilize available tools. Look for a tool like Budget Watch, where you can opt to create a spending plan from your existing accounts. Using your account history, Budget Watch will suggest monthly goals for different expense categories (like transportation, shopping, travel, and more), or you can manually set goals. It may help to start with the suggestions, take a couple of weeks or months to see how they match up with your actual spending, and then fine-tune the numbers. Among the benefits of using a tracking system is that it makes it easy to see if one particular expense is really setting you back — maybe you realize 50% of your take-home pay goes to rent — and then you can think about how you can adjust. In this example, you could opt to live with a roommate or look for a less expensive apartment when your lease is up.

2. Distinguish your wants and needs

Some things you need in life, like that $30 copay for your monthly medications or a $20 tank of gas to get to work each week. But other things — entertainment, meals, and shopping — can be managed. After you’re in the swing of monitoring your budget, turn a critical eye toward those discretionary expenses and determine what you can trim, if you need to.

Take, for instance, your lunch. If, on average, your daily sandwich, burrito, or falafel pita costs $10, that’s $200 over the course of a four-week month. The average brown-bagged lunch costs $4 per day, or $80 per month. Over the course of a year, you could easily save more than $1,000 by packing your own lunch most of the time, still taking the occasional trip to your favorite haunt.

Monthly subscription services can be a similar black hole for your money. Sure, $10 a month doesn’t seem so bad for streaming video service. But add that to the other monthly costs — $10 for streaming radio, $100 for your spinning classes, $10 for your monthly beauty box — and suddenly half of your paycheck is gone. Take inventory of your subscriptions and make an honest assessment of whether you really need them.

3. Pay yourself first

There’s a popular expression in personal finance to “pay yourself first.” This means automatically routing specified savings from each paycheck to an investment account, like a 401(k), or to your savings account. If you can afford it, set a fixed amount to directly deposit into your savings account each month — say 5% or 10% of your take-home pay. Experts generally agree you should aim to have three to six months’ worth of expenses saved in an emergency fund.

In addition to an emergency fund, you should be saving for retirement. So, if your employer offers a 401(k) plan, take them up on it. While it may be a little overwhelming to think of saving for retirement now, putting away money early can add up. Consider this: If you start saving $2,000 a year when you’re 25, and your earnings grow at 8% a year, you’ll have around $560,000 when you’re 65. If you wait until you’re 35 to start, assuming you contribute the same $2,000 annually and get the same 8% rate of return, you’ll have only about $245,000 when you’re 65 — less than half of what you would have amassed if you had started saving 10 years earlier, even though you only contributed $20,000 less. Amazing, right?

The payoff

According to the Wells Fargo Millennial Study, only 45% of respondents have “an established routine” for reviewing their finances and a little more than half (54%) say they have a budget. Of the 46% who do not have a monthly budget, 37% say they don’t need one, and 33% say it’s not a priority.

While monitoring your money isn’t exactly the most exciting topic, if you put the work into developing and sticking to a plan now, you’ll be developing good habits for life. (Kind of like eating your vegetables or brushing your teeth.) This can pay off down the road in the form of good credit, a healthy emergency savings fund, and an ability to achieve future goals like owning a home.

Check out the My Money MapSM service for customized budgeting and saving goals.