After graduating college, it’s time to move on to your career and start earning a decent wage. It’s also time to start paying back any debts you incurred during the course of your education. That can present a fairly large financial burden, especially for graduates who don’t find work right away.
Aside from paying back student loans, you’ll have a variety of expenses to keep up with, not to mention preparations for the future. Meeting all these financial obligations takes some planning, so here are 6 financial planning tips for college graduates to help with that:
1. Create a Budget
The first item of business is to create a budget. For most graduates, you should plan to live below your means. This is especially true when you’re starting to save for the future and pay back student loans.
If you don’t have work yet or if you’re still living at home, it may be difficult to put a budget together without knowing your income or expenses. Researching potential careers and assessing local expenses can help you put a practice budget together. This budget should cover expenses such as:
• Rent/Living Expenses
• Student Loan Debt
• General and Unexpected Expenses
• Any Monthly Payments
In the end, your budget should account for monthly costs and help you make sure your current earnings can meet those expenses. If your expenses end up being a bit high, make some cuts where necessary.
2. Track Your Spending
Once you have a budget together, figure out a way to track your spending. You might try a traditional approach by saving receipts and logging them into your budget or balance sheet every day. If you don’t trust yourself to keep on top of that (or if you’d rather not save receipts at all) there are third party apps available that will track your spending for you.
Keeping track of your daily spending helps you make wiser decisions about purchases. It cuts down on impulsivity, which can make it far easier to keep to your budget.
3. Focus on High Interest Debts First
When planning out your budget, if you have any room to pay loans down, do so. Student loans frequently have a grace period after graduation when interest doesn’t start to accrue. If you have the means, make some advance payments to get the balance down as much as possible, particularly on your higher interest debts.
When prioritizing student loans, it helps to list them out first. Determine the total balance you owe on each as well as its interest rate. If your means aren’t quite enough to meet all of your debt obligations, you may be able to qualify for deferment, forbearance, or alternative payment arrangements on federal loans. In general, you should pay down the accounts with the highest interest rate first.
You might also be able to make similar arrangements with private loans, but that depends on your lender and your situation. In many cases, Best Reward is willing to work with its borrowers to make sure their debts get paid, so it can be worth having that conversation with us if you’re struggling.
4. Track Your Credit
In connection with your student loans, you’ll want to keep track of your credit. You are entitled to at least one free credit report every year from each of the three major credit bureaus, so take advantage of that.
You will also want to do everything possible to safeguard your credit. This means making payments on time, avoiding credit card debt, limiting the number of credit accounts you open, and so forth. By taking care of your credit, you make it easier to qualify for financing to help with future expenses, such as a house, car, etc.
Protecting your credit will also mean preventing identity theft (shred documents, avoid logging into your financial accounts while in public places, etc.). If you suspect someone is using your account to make purchases, notify us immediately.
5. Start an Emergency Fund
Sound financial practice also consists of saving up for emergencies. Establishing an emergency savings fund can help you prepare for random expenses that may come up, such as vehicle repairs, hospital expenses, etc. This fund can also be used for other large expenses that may come up in the future, such as a down payment on a home or apartment deposit.
With this fund, you’ll want to avoid taking unnecessary risks. As such, a simple savings account would likely be more appropriate than something like a mutual fund. The account itself should grow to be enough to cover six months to a year of expenses, so it’s important to make regular contributions.
6. Start to Save for Retirement
Most college graduates don’t think much about their retirement, but it’s better to start saving now than later. The sooner you start, the more your retirement account will grow. Simply starting in your twenties rather than your thirties can make a difference of thousands of dollars in the long run, so it’s worth looking into which accounts would be best for you now.
Planning for Financial Success
By embracing even just a few of these financial tips, you can prepare for the future while being better able to meet your current financial obligations. These are relatively simple to implement for most college grads. Consulting with your credit union can also help you make the plans you need to be financially successful in the future.
Start Planning with our Free Budget Worksheets