Note: This post was written by Jim Wang; see his bio at the end of this post.
#1: Start Keeping a Budget
The cornerstone of any solid financial plan is a budget. It’s a map of where you’ve been and where you need to go.
A budget can help you understand the money coming in, from your job, and the money going out, for your expenses. You can get very specific and track every penny you spend, or rely on tools, like Mint, that track your spending and help you with your budget. Regardless of your method, the key is to do something. You need visibility into your spending so that you can make smart decisions about where your hard-earned cash is going.
Are you spending too much on rent or a mortgage? A budget will tell you.
Are you spending too much eating out? A budget will tell you.
Without a budget, you’re flying blind, and it’ll become very difficult to reach any financial goals.
#2: Spend Like You’re in College
Now that you have a firm grasp on your spending because of a budget, try to spend like you’re still in college living off Ramen. It will be tempting to spend more now that you have a full-time job, but resist that temptation.
You were likely used to a certain, less expensive lifestyle in college, so try to remain at that level.
Put the rest toward savings goals, such as an emergency fund, your retirement and your first home; you’ll find yourself able to reach those goals much faster than you otherwise would have.
#3: Moving Expenses
Did you move because of your first job and pay for some, or all, of it out of your own pocket? Those are considered “unreimbursed moving expenses,” and they may be tax deductible.
There are three rules when it comes to moving expenses:
- First, the move has to be related to the start of work, both in time and place. For time, it needs to be within a year of the start of work. So, you can start work at a new place, move six months later and still qualify.
- The second rule is the distance rule. The distance rule says that your new main job location has to be at least 50 miles farther away from your previous residence than your previous main job location. If you lived 5 miles away from your previous job location and 50 miles away from your new job location, you would fail the distance test because the difference is only 45 miles.
- The third rule is the time test. The time test is simple: you must work full time for 39 weeks during the 12 months after the move. It doesn’t have to be with the same employer, and it doesn’t have to be 39 consecutive weeks, but you do need to work full time for 39 weeks.
If you satisfy all those rules, you may be able to claim your moving expenses on your tax return. You will be able to deduct the reasonable expenses of moving your household goods, as well as travel (excluding meals), so keep good records of what you spend.
#4: Student Loan Interest
If you graduated with student loans, the interest you pay is often tax deductible, depending on your income level and a few other factors. The main factors that would disqualify you, outside of income, are filing status and whether you are dependent. If you file as married filing separately, or if you, or your spouse, are claimed as a dependent on another return, you cannot claim student loan interest.
As for income, if you have a modified adjusted gross income above ,000 (or 0,000 for joint returns), then your deduction will begin to phase out all the way up to ,000 (0,000 for joint returns).
If you qualify, you are able to deduct up to ,500 of your student loan interest for 2015.
#5: Job Hunting
You may have heard that job hunting expenses are tax deductible and they are; they just aren’t deductible when you’re looking for your first job. When you switch jobs and remain in the same line of work, that’s when they may be tax deductible.
You can deduct a variety of job hunting related expenses from fees you pay to an employment agency to costs associated with preparing and sending out your resume. If there is travel involved, that is deductible as well, once you exclude any personal expenses.
This is a miscellaneous itemized deduction, so the amount you can deduct will depend on whether the sum total of your miscellaneous itemized deductions exceeds a certain threshold (2% of your adjusted gross income) for miscellaneous itemized deductions.
Good luck out there!
About the Author: Jim Wang writes about personal finance at Bargaineering.com, a site that has been featured in The New York Times, BusinessWeek and many other publications. You can follow him on Twitter at @bargainr.