All Posts Tagged: new graduates
Soon students will be graduating from college and transitioning into the “real world.” For the last four years (or more), they’ve been focused on their education, balancing their grade-point averages, class schedules and college life.
Now it’s time to start a new career, balance checkbooks, and start the next chapters of their lives.
To the recent college graduate: This may seem daunting, but if you have your finances in order, the transition can be an easy one. The following five steps may help you achieve financial success as you embark on your new journey.
1. Build a budget. After getting your feet wet in the post-college world and seeing what your take-home pay amounts to, figure out how much you can afford to spend each month. Begin with living expenses: rent, car loan, gas, utilities, groceries, etc. Once that’s established, you’ll have a good idea how much money you have left to spend or save. The rule here: Always spend less than you make.
2. Consolidate your debt. There is nothing more worrisome than trying to figure out how to pay off college debt. If you have multiple loans and credit cards, consider consolidating all of your debt. That way you are only paying one lender with one interest rate. It will help you understand your total debt as you start paying it off.
3. Steer clear of new debt. If you don’t have readily available funds, it may be tempting to apply for a new credit card to splurge on whatever you’d like. However, adding debt on top of the debt you already have can be a recipe for disaster. I do think that splurging on yourself is OK every once in a while, but not at the expense of incurring debt.
Also, a potential future employer may check your credit. So it’s best to steer clear! (See this blog post for tips on maintaining a good credit score.)
4. Start an emergency fund. Life happens. And when it does, hopefully you’re prepared for it. Whether you need to repair your car, pay an unexpected medical bill, or pay for living expenses due to a loss of employment, having an emergency fund to dig into is critical.
If possible, try to set aside the equivalent of three to six months’ worth of living expenses. Here’s a tip: Split up your direct deposit into a primary account and secondary account. Allocate a certain dollar amount or percentage of your paycheck you want to save into your secondary account. Since the money is being directly deposited, you won’t “miss it.” Out of sight, out of mind.
5. Start saving for retirement. It’s never too early to start saving for retirement. If your employer offers a 401(k), take advantage of it immediately. Your contributions are deducted from your paycheck automatically and are pre-tax, meaning you don’t pay income tax on that income until you start withdrawing it in retirement. If possible, contribute enough to receive the employer match, as this is basically free money and you can save for the future without even thinking about it!
I hope you found this information helpful. Wishing you the best of luck in your future endeavors!
New graduates may also want to test their financial smarts with the quiz in this infographic.
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