saving for your future: what to do with your money once you get a steady income

So, you've graduated from college and landed a good job with a decent income? Before you go spending all of your newfound revenue on the latest fashions and newest technology, think about where you want to be financially in the next five, ten, or twenty years. Here is a list of responsible ways to use your money once you get a steady income.

Build an emergency fund. You need a savings account to cushion yourself in case of emergencies, such as loss of job, car repair, etc. Set up a separate savings account that doesn't link to your checking account and try to deposit around 5-10% of your earnings into that account each month. (If you link your savings account with your checking account, you will more than likely dip into your savings throughout the year.) The minimum amount in your emergency fund should be three to six months worth of basic living expenses.

Pay off credit cards. The average college student has around $2,000 (or more) in credit card debt by the time he or she graduates. If you made it all through college without any credit card debt, count yourself lucky. For the rest of you, focus on getting out of debt. If your income allows, try to pay at least $50 over the minimum amount due each month. If your credit card has a high interest rate, consider transferring the balance to a card with a lower rate and better terms.

Begin saving for retirement. As a new graduate, this may be low on your list of financial priorities since retirement is so far away. However, because many employers match employee contributions up to a certain percentage, you should sign up for a 401(k) or 403(b) as soon as you land a job to take advantage of that free money. Even if you don't get a match from your employer, you should still begin saving for retirement as soon as possible because now you have time on your side. The earlier you start saving, the better off you will be in the future.

Buy assets, not liabilities. Want to know how the rich get richer? They invest in assets, not liabilities. An asset makes you money. A liability costs you money. So, as soon as you can, buy a house instead of renting. Drive your car as long as you can instead of trading it in for a new one every few years. Begin saving and investing your money now. As a recent college graduate, you should start by investing in CDs or money market funds. Once you gain more knowledge about investing, you can move on to stocks and bonds.

Get health insurance. Having health insurance is a wise decision. Just one accident or illness can cost thousands of dollars. Some medical bills could even cause bankruptcy if you don't have insurance. If your place of employment offers health insurance, you should sign up since group coverage is cheaper than individual plans. If that's not an option, you should purchase an individual health plan. Search around for the best quotes.

Reduce your student loan debt. On average, college students graduate with $24,000 in student loan debt. While student loan debt is considered "good debt" because it's an investment in your future, it's still debt. Take steps to reduce your student loan debt by:

• Setting up electronic payment. With some loan servicers, you may be able to reduce your interest rate if you sign up for electronic debiting.
• Looking into Loan Forgiveness. Under certain circumstances, the federal government will cancel all or part of an educational loan. Check with your state's Department of Higher Education for qualification details.
• Making extra principal payments on your loan. If you can afford to do so, pay more than your minimum payment each month and have it applied to your principal.
• Refinancing your loans. If you have excellent credit and a steady job, you may find that a company such as ELFI could help shave a few years off your repayment schedule or allow you to pay less by offering better terms than your current loans. You could use the extra money you save to put towards retirement or to pay off your loans faster. Just be sure to do your research if you think you might need to take advantage of deferments or forbearances, since you may lose those benefits when refinancing with private companies.

Being financially responsible and saving money can be hard when you're young. Since you are enticed daily by advertisements of the latest fads, you may find it more difficult to get out of or avoid debt and build your savings. However, if you can stay strong and not spend your hard-earned money on frivolous items now, you will thank yourself later.