College graduates are entering a new chapter of their lives, and they should be feeling the joys of their successes. But while many are entering the working world, many are also facing student loans, credit card debt and non-existent saving accounts.
Creating a post-college financial plan and following it may feel overwhelming, especially when you cannot afford professional financial advice, but that does not mean that you cannot implement money-saving tips. By following some general financial steps, you can complete your first post-college year with savings in your bank accounts without a consultation with a financial adviser.
The typical college student will graduate with student loans that they will be responsible for starting paying shortly after graduation. Therefore, before you are scheduled to purchase your cap and gown, you should learn everything you can about how your loans work. You need to find out if your loans are private or government funded, and if you have a fixed interest rate or variable interest rate. You should also find out what your options are for consolidation and refinancing. While it is important for recent graduates to learn as much as they can about their student loans, they should also know that they do not immediately have to start paying back their loans once they graduate. Graduates in the United States who have federal loans are given a six-month grace period on student loans payments, which gives them a chance to enter the workforce and start making money. Private loans may offer a similar grace period after graduation, but it can vary by provider.
Most college graduates dream of their own apartment that they can pay for fresh out of college. Unfortunately, with the combination of both low entry-level salaries and the ever-increasing housing market, many new graduates are scrambling to find housing that they can afford, especially in large urban cities. Instead of taking on an apartment on your own and struggling to make ends meet, consider getting one or more roommates. Not only will your monthly rent be cheaper, but also so will your portion of utilities, water, cable and internet and any other fees that you as a renter may be responsible for paying.
Another housing option for new graduates is moving back in with parent or guardians, when available. Your family may offer free or reduced living expenses, which can help you build up your savings. Moving back in with parents may not always be the best choice, depending on your relationship with your family. But if you do move back in with your parents, make sure that they see your appreciation. Try to help around the house with cleaning or yard work, or anything you can do to make sure that your parents do not think that you are taking advantage of their generosity.
If moving back in with your parents seems like a viable choice, the financial gains could be monumental. Not only will you be saving money, but also you can use that money to pay off student loan debt, credit card debt or any other debts that have high-interest fees. Even if you only plan to live back at home with your parents for six months to a year, you will be able to gather a substantial amount of savings that will keep you afloat when you do eventually leave the nest. Your new savings account can help put a security deposit on a new apartment with some friends or be used towards putting a down payment on a house. No matter what you spend it on, you will have the financial freedom to make your own decisions about your future.
As soon as you land that post-grad job, participate in your employer’s retirement plan, especially if they are going to offer matching contributions. If you start investing your money in your 20s, you will be financially confident through your 30s, and throughout the rest of your life. The longer that you have money in the market, the larger your investment returns will be able to compound, and the earlier you will be ready to retire.
Not only will you save more money if you start a retirement account as soon as you graduate, but you will also get used to putting aside a certain amount of money each month without thinking about it. The longer you save money, the easier it will be for you to forget about the money you are saving each money, which will stop any temptations from tapping into the account. Penalties for early withdrawal are common with 401(k) accounts.
Creating an emergency fund that you are not allowed to tap into may seem unnecessary for a recent college graduate. Nevertheless, if you were to have a medical emergency or unexpectedly lose your job, the money in your emergency fund is what you would use to keep yourself afloat until you are once again on your feet. Typically, you should try to keep up to six months of living expenses in your emergency fund and try to set said the same amount of money for each paycheck to ensure that you keep adding money to the account.
If you accumulate debt within your first couple of years of graduating, you may potentially yourself to future job opportunities, and you are putting yourself in a debt hole that you may be unable to get out. If you are forced to make large credit card payments each month, it might stop you from taking a particular job because the job does not pay enough to cover your monthly expenses. But if you are living free of debt payments, you will be able to pursue a broader array of career opportunities, and chances are one may be your dream job.
Not only can debt prevent you from getting a job that you want, but it could also prevent you from getting a job altogether. It has become more common for employers to check prospective employee’s credit reporters before they decide on a candidate, usually for positions that handle money or deal with sensitive information. Therefore, no matter how qualified for a job you may be, you might be passed over because of your financial situation.