Graduation college can be one of the most exciting times in your life. You’re officially an adult, but the financial decisions you make today can impact the rest of your future.

Here’s a few questions to ask yourself after graduation before making any important life decisions.

1. Where Should You Live?
Depending on where you want to live and what you earn, you probably can’t move into your dream home right away. Your location of choice may be tied to many variables — job, family and personal preferences.

To avoid overspending on housing, be realistic about how much you can afford. As a rule of thumb, roughly one-third of your net monthly pay should be used to finance where you live. If your starting income is modest, you’ll likely pay a higher percentage for housing.

If you decide to rent, always read the entire lease before signing anything. Find out the details, such as how long the lease lasts, whether it includes utilities, and if there is a fee terminating the lease early.

If you’ve already saved up money for a down payment on a house, consider buying a condo or single-family home. In the current economy, Interest rates are near historic lows. And the sooner you purchase, the quicker you start building equity and claiming the tax benefits that come with owning a home.

If you can find a roommate, you’ll have extra money each month for other living expenses, such as furniture and bills. Alternatively, you could consider the upsides of living with your parents for a little while you save up.

2. How Much Money Should You Save Each Month?
Living paycheck to paycheck can lead to significant stress if you lose your job, become disabled, or incur a major expense. It’s best to set aside a predetermined amount from each paycheck that goes directly into your savings. This amount should be separate from your retirement savings.

Keeping a separate savings account will help prevent you from thinking of this amount as part of your disposable income. As a rule of thumb, you should try to build a “rainy day fund” that equals three to six months of monthly pay.

3. Should You Begin Saving for Retirement Now?
It may seem premature to think about retirement when you get your first job out of college. But you can start a large nest egg by saving small amounts early when your contributions have time to compound. Plus, any money you put into tax-deferred accounts lowers your taxes in the year you contribute. (Income taxes will be due when you eventually withdraw funds from these accounts, however.)

If your employer offers a retirement plan, such as a 401(k) plan, sign up as soon as you can afford it. Also, find out if your employer makes “matching contributions.” Besides employer-provided plans, there are many other retirement planning tools. For example, Roth and traditional IRAs may be beneficial, depending on your situation.

As an added bonus, you may be able to borrow from a 401(k) account or take money from an IRA, without paying an early withdrawal penalty, for several reasons, including the purchase of a first home.

4. Do You Need to Buy a Car?
After putting money toward living expenses, savings, and retirement, new graduates need to budget for another essential: transportation. Again, you might not be able to afford your dream car right away. Moreover, a car may not be necessary if you live and work in a city with reliable public transportation.

If you decide to buy a car, consider saving money with a used car. Another way to save money is to look for a car loan with the lowest possible interest rate by:

  • Checking your credit. Consider a co-signer if your credit rating isn’t very good or if you haven’t established any credit rating yet.
  • Shopping around for interest rates at your bank, credit union and various car dealerships. Try to get quotes from at least three different sources.

If you finance a vehicle through the dealership (because it’s convenient) and later find a lower rate elsewhere, you can pay off the original loan with the lower rate loan. Just make sure the original loan doesn’t include any prepayment penalties. Some homeowners even use home equity loans to finance their vehicles, because the interest is generally tax deductible.

5. What Types of Insurance Do You Need?
Graduation is a good time to make critical decisions about auto, health, and life insurance coverage.
Most new graduates get their health insurance coverage through an employer. If you’re unemployed or your employer doesn’t provide coverage, you may be allowed to stay on your parents’ policy for a few more years (until you turn 26). This is likely to hold true even if the Affordable Care Act (ACA) is repealed, as that provision was retained in the bill to repeal the ACA, which stalled in the House earlier this year.

If you can’t get coverage through a parent’s health insurance provider, you need to consider other ways to comply with the ACA’s individual mandate — or you’ll face the shared responsibility penalty. Nonexempt U.S. citizens and legal residents will generally owe this penalty if they fail to have minimum essential coverage for themselves and their dependents for any particular month. Coverage options for the unemployed include:

  • Certain government sponsored programs (such as Medicare, Medicaid, and the Children’s Health Insurance Program)
  • Plans obtained on the individual market
  • Certain grandfathered group health plans
  • Certain other coverage specified by the U.S. Department of Health and Human Services in coordination with the IRS.

There are a number of exceptions to the penalty, such as the one for eligible lower-income individuals and the one for some people whose existing health insurance plans were canceled.Also, consider obtaining life insurance. If you sign up when you’re young and healthy, the rates are generally less expensive. Depending on your needs later in life, as well as health issues that can creep up over time, the cost could rise significantly in the future.

6. How Can Discretionary Spending Help You Build Credit?
Any money that’s left over from your paycheck is available for discretionary items, such as vacations, dining out, pets, clothing and personal pampering. Credit cards can be a convenient way to pay for discretionary items, and, as an added bonus, they often accrue rewards points that can be redeemed in the future.

If you don’t already have a credit card, sign up for one to help build credit. But resist the temptation to spend beyond your means. Always pay off your credit cards in full monthly — or you’ll likely incur high-interest rates on any unpaid balances. Interest-free financing offers (for, say, a mattress or an appliance) can be another way to save money and build credit, but you must pay off the balance in full before the deal expires — or you’ll incur high-interest charges from the original purchase date.

Need Help?
As soon as you graduate, it’s important to establish relationships with tax, business, and legal advisors. During your career, you’ll likely need help from experienced professionals who can assist you as your needs evolve. By initiating these relationships now, you’ll know whom to contact when help is needed.