CindyBy  Cindy Szymanski, Financial Advisor

Congratulations – you’ve graduated from college and are well on your way to being an independent adult; or are you still a dependent? While many recent graduates may have landed a full-time job, others are still working only part-time or are doing a low-paying internship. But did you know that depending on your income and job status, your parents may still claim you as a dependent on their tax return – not as a child, but as a qualifying relative. The two main factors that will allow your parents to still claim you as a dependent are:

1. Your gross income (must be less that the personal exemption amount – $4,050 for 2016);

2. They still provide more than half of your total support for the year.

If your parents can claim you but do not, you still are not allowed to claim yourself on your tax return.
Of course, the real goal once you graduate from college is to become totally self-sufficient and stop being a dependent. That means you need to start thinking more seriously about your income, debt and savings, and try to set up a game plan to achieve your financial goals.

Depending on your current job status, you may be living on your own or are still living with your parents who are paying your monthly living expenses (i.e. rent, utilities, food). While it is great to have help with living expenses, you will eventually need to get out on your own and start budgeting your income to pay for these non-discretionary expenses, which also could include a car payment, student loans, credit card debt, etc.

If you are working and mom/dad are allowing you to still live at home to save some cash, it is a good idea to put together a budget listing all your expenses and prioritize what needs to get paid off first (usually credit card debt and student loans will be at the top of the list). Even though you may not have rent and utilities to pay yet, you should set aside these funds as a savings, so you get used to budgeting and know where your income is going. Stick with your budget! If you find that you have a shortfall every month, start looking at ways to earn more income (extra hours, additional part-time job) and also analyze your expenses to see where you can cut costs, like Starbucks or eating out.

If you have started a full-time job that offers a workplace retirement plan, like a 401(k), you should set up automatic contributions from your paycheck immediately to start your retirement savings. If your employer offers any type of match, you should at least contribute that much, even if money is tight, so you don’t leave any “free money” on the table.
As you learn to live within your budget, and your income starts to grow, you can put more down on your debt payments (credit cards, student loans). You can also contribute more to your workplace retirement plan. Still have additional cash? You can save for additional financial goals you may have like saving for a down payment on a new home.

While life can seem easier while you are at home and don’t have a lot of expenses to worry about, in the long-run working and saving for your own financial independence will be well worth your time and effort! Good Luck.