young professional

5 Steps for Young Professionals to Boost Financial Confidence

Young professionals have a steep learning curve when it comes to finances. When meeting with clients no longer in the young professional category, a few topics come up regularly that fall in the ‘I wish I knew that then…’ bucket. Learning to navigate within your means, maximizing your resources, and planning for the future will give you a leg up on your financial situation.

Step 1: Create a budget 

Stepping out on your own as a young professional is a significant transition. Financially you will have some ‘start-up’ costs as you build your adult life. The transition phase is an excellent time to learn how to budget and make it a habit.

To begin your budgeting process, you will tally all your monthly expenses, including housing, food, entertainment, gas, etc. You will also calculate and estimate your one-time costs, including vacations, furniture, and moving expenses. In the transition phase, your budget will vary monthly; you must continue adjusting and tracking your spending. The numbers may dictate you must make some hard prioritization decisions. Can you afford to save and live the lifestyle you are building, or do you need to cut back on some expenses?

In terms of saving, you might feel pulled in many directions. Simplify the saving process by creating a priority list.

  1. The priority is an Emergency Fund; check out the blog Your Emergency Fund Moves You Forward to learn more about how to approach this goal.
  2. Then move on to retirement saving; start with contributing at least as much as your employer match. Every year increase your contribution by 1%; if you receive a significant promotion or raise, increase your contribution accordingly.
  3. Next, you can begin to save in a taxable, more flexible than a retirement account, with no contribution limits or restrictions on accessing the funds.

There are technology solutions to help automate the budgeting process. You will have to evaluate which platform suits you best. The top contenders are,, and (formerly

Step 2: Verify your Student Loan Approach 

A significant challenge for a young professional is the hurdle of student loan debt. We have seen situations where it seems almost impossible to overcome; coming up with a plan to tackle six figures of debt with a $50,000 salary is not easy. You need to advocate for yourself and evaluate the most efficient repayment strategy. Some options may help you find some light at the end of the tunnel, such as the Public Student Loan Forgiveness program (PSLF). The PSLF is a unique option for those with a qualifying job in the public sector to apply for loan forgiveness after a set number of years in the position. Another option may be to evaluate the possibility of changing your tax filing status. In some cases, married filing separately can benefit the student loan repayment calculation more than married filing jointly.

Step 3: Build Credit

While student loan debt is a hurdle, not all debt is bad. Establishing and building your credit is crucial to your early years of building your financial foundation as a young professional. Credit scores are not an end-all all evaluation of how you are doing financially. Credit scores are how society and businesses have decided to systematize the assessment of how much to loan someone based on their past behaviors. Your credit score is based on criteria such as how timely you make debt payments, how long you have had lines of credit open, and how much debt you are utilizing.

The easiest way to build your credit is by opening a credit card, using it occasionally, paying it on time, and not regularly maxing it out. Keep that credit card open and use it sometimes, even as your credit builds, because it will be one of your earliest lines of credit. You want to maintain a long activity history on at least one credit card.

Building your credit will make you eligible for more attractive loans when doing car shopping and house shopping. The stronger your credit, the more likely you will be able to negotiate for better terms, such as a lower interest rate on the loan.

Step 4: Maximize Employer Benefits 

Employer benefits can be a valuable piece of your compensation as a young professional. There are three health-related benefit categories: medical, dental, and vision. Within each category, you may have multiple choices. Medical insurance tends to be the most complicated of the three.

If your employer offers a high deductible plan, you can contribute to a health savings account (HSA). HSAs are unique accounts due to their contribution limits and their tax treatment. Our blog, 7 Ways an HSA Can Help You Now and In Retirement, highlights the advantages of these account types.

Review if your employer offers a match to an HSA. In 2024, the maximum HSA contribution for self-only coverage is $4,150. HSA contribution limits are much lower than retirement contribution limits, but those balances can increase over time. There are essentially two ways to use an HSA. You could use the HSA balance as you go, meaning you keep the equivalent of your out-of-pocket maximum in cash and use the HSA balance to pay for medical expenses as they arise. Alternatively, you could use savings or checking to pay for medical expenses, investing the HSA balance and allowing your HSA balance to grow with the intent to use it later in life.

Some employers offer stock options as a part of your compensation. Employers include stock options as compensation to attract, reward, and retain employees. The two most common stock option structures are restricted stock units and incentive stock options. Take a look at our blogs, Have a plan to manage your Restricted Stock Units (RSUs), and Evaluate Your ISO Strategy to Create Value and Save Taxes. Stock options do have tax consequences. RSUs are treated and taxed as earned income in the tax year they vest. In comparison, there are no tax consequences when you receive an ISO grant or exercise that option. Instead, you report the taxable income only when you sell the stock.

Step 5: File Taxes Efficiently

You may be in the first few years of filing your tax return as a young professional. Previously you were counted as a dependent on your parent’s tax return. If there is still a question if your parents should be claiming you as a dependent on their tax return, you can refer your parents to these questions:

  • Are they related to you? The dependent can be your son, daughter, stepchild, eligible foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, adopted child, or an offspring of any of them.
  • Do they meet the age requirement? Your child must be under age 19 or, if a full-time student, under age 24. There’s no age limit if your child is permanently and totally disabled.
  • Do they live with you? Your child must live with you for over half the year, but several exceptions apply.
  • Do you financially support them? Your child may have a job, but they cannot provide more than half of their own support.

If the answer is no to any of these questions, you must file your return, and your parents can no longer claim you as a dependent.

Once you are married, the tax filing decision may become even more complicated because you are not required to default to married filing jointly. In certain situations, married filing separately is more advantageous than MFJ. When one person in the couple has significant student loan debt, and the other does not, it is worth running it through your tax preparation software or asking your tax preparer to compare MFJ versus MFS.

The Bottom Line

You will face challenging financial decisions as a young professional. You are responsible for taking the steps necessary to make the most of your financial decisions. You can become an expert by researching, reading, and asking questions, or you can rely on experts to help guide you through financial decisions as they arise. The strategies you begin to implement now will lay the foundation for your financial habits and will shape your future.

If you know someone who could benefit from the information in this blog, please share it with them.