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Mapping Your Financial Journey

Sept. 8, 2016
Banking, Personal Finance
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The degree matches the dream, the wardrobe matches the job and the home matches the salary, so your bank or financial institution should match your personal finance goals.

Every season of life comes with different financial goals and challenges. It’s unlikely that all your needs will be met in one place, so you’ll need to manage your money at multiple financial institutions.

A money map, or a financial plan, helps you make the right moves to reach financial milestones.

Starting out


Mapping Financial Journey Job

When you graduate, you’re bombarded with new responsibilities. The right financial plan can help you handle them and carry you through to retirement.

A good strategy to follow is the 50/30/20 budget — popularized by U.S. Sen. Elizabeth Warren of Massachusetts  — in which 50% of your after-tax income goes toward necessities, 30% to spending on wants and 20% to saving for retirement and paying off debts.

Here are some accounts to help you get on track in this early stage:

Free checking accounts

To get better rates, perks, features or lower fees on your checking account, you may need more than one account. Free checking accounts most commonly are found at credit unions or online-only banks, while big banks offer more branches. If you want good rates and a walk-in location, open an account at each type of institution. If your current bank doesn’t meet your needs, consider switching.


A good savings plan can help you cover emergency expenses and buy bigger-ticket items without going into debt. Saving can be divided into several categories.

  • Emergency fund: This long-term savings account takes priority. Set up automatic payments, or any system that works for you. Aim to cover three to six months of expenses, or more if you’re self-employed. Start with at least $500 in savings to build a fund for smaller emergencies and repairs. Not all banks offer the best interest rates, but don’t settle for anything below an annual percentage yield of 1%.
  • Short-term savings: This account covers bigger purchases, such as a big-screen TV, a new computer, a vacation or holiday expenses. Consider a money market account and link it to your checking account to avoid overdraft fees. You may get a debit card and the ability to write checks. Don’t worry about interest in the short term, because you’ll likely be pulling out your money before it has a chance to grow.
  • Retirement savings:  Save at least 10% to 15% of your gross income for retirement, even if you have toxic debt — high-interest debt from credit cards or other loans. If your employer is willing to match your contributions, take full advantage of the perk. Money contributed to a 401(k) or an employer-sponsored account in your 20s is far more valuable than amounts saved in your 30s or 40s. Check out a Roth IRA if you’re self-employed or if your job doesn’t offer a 401(k), but watch out for fees there. Time is on your side, so let your money start growing.

Other accounts

  • Credit card: If you haven’t started building a credit history yet, using a credit card responsibly is the easiest way to do it. Debit cards don’t build credit and they are less protected against fraud than credit cards. Establishing good credit will help when you’re ready to buy a home or a car, or make other big purchases. The right credit cards can also earn you some money if you use them wisely.
  • Student loans: If you have student loans, take advantage of your six-month grace period after graduation to create an affordable payment plan. Options to consider include consolidation, refinancing and switching to an income-based repayment plan. Keeping up with student loan payments is a must, but prioritize paying off any high-interest debt first.

» MORE: How to choose a bank account after college

» MORE: The top 5 money moves to make after graduation

Getting settled

Mapping Financial Journey Purchase

Whether you’re putting money away for a car, a house, your wedding or another hefty purchase, the goals are the same — save more, spend less. Shop around to get the best loan or savings rates.

Savings accounts are the surest way to stash money for the down payment of a home or for a large purchase, but you may want to consider the following options when they’re not enough:


Now that you’ve built up your credit, it will be easier to secure a loan. But first consider whether a loan is cheaper than a low-interest credit card. If you choose to go with a loan, look at credit unions, which tend to offer more reasonable rates than other institutions.

Certificates of deposit

Choose a CD if your goal is two to five years out, you have more than $1,500 to put away for a fixed term and the CD offers a rate that’s higher than a high-yield savings account. Otherwise, you’d lose access to your money for that period without getting the best rates.

» MORE: How to buy a car

» MORE: Buying a home: saving for a down payment

Expanding family


Money Map Family

You’ve now got the car, the house, the significant other and maybe the white picket fence. As you build a life together, you’ll have to decide whether to combine your finances, too.

Joint accounts or separate accounts

For some couples sharing is caring, but debt or bad credit are valid reasons to keep finances separate. Some couples keep separate accounts and open a joint checking account for household expenses. For spouses with different banking preferences, separate accounts at different banks, in addition to a joint account, can meet the needs of both.


Saving is especially important when a couple is thinking about starting a family. In addition to maintaining an emergency fund, couples will need to save for pregnancy and post-pregnancy expenses. They’ll also have to save for about 12 weeks of lost income if the primary caregiver works and his or her employer doesn’t offer paid parental leave. Once a couple gets into the financial groove of parenting, it’s also important to consider a savings account for the child.

Life insurance

A good life insurance policy can keep your family covered financially if you die unexpectedly. The policy type depends on a family’s needs. For example, parents will need a policy that covers child care and education, and homeowners will need a policy that helps a spouse keep up with mortgage payments when one income is lost. The most common types of insurance — term life and permanent life — encompass many categories. For the majority of consumers, a term life policy is the best choice to meet the needs of surviving family members.


Saving for retirement is the most important investment. Next, you can explore a 529 college plan, which can help pay for college and related expenses for your children or other family members. If you want to explore other investment options for short-term and long-term goals, do it after you’ve got a solid financial plan and paid off high-interest debt.

» MORE: A guide to who needs life insurance

» MORE: NerdWallet’s financial guide for new parents

The right account at the right time

Your priorities will evolve with different life events, so you’ll need various financial accounts to keep up with the changes. Explore using multiple banks or financial institutions, along with investment and insurance options, to build a financially secure future.

Melissa Lambarena is a staff writer at NerdWallet, a personal finance website. Email: [email protected]. Twitter: @LissaLambarena.