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Graduating from college is an exciting milestone with endless opportunities to follow. However, the transition from student life to the real world can be difficult, especially if you struggle with finances. Managing your money doesn’t have to be stressful, and there are ways to set yourself up for financial success. Here are a few tips to help you thrive financially as a new college grad.
Create a Budget
Once you finish college, you start a new chapter of your life with many firsts: your first job, your first salary, and your first time living on your own. With so many new responsibilities, it’s important to create an organized budget to manage your finances.
Track your income and expenses each month, and determine how much you can afford to spend. Allocate your salary to essential expenses such as rent and utilities, and decide which other payments you want to prioritize. Outside of your living essentials, make sure to account for high-interest bills such as student loans and debt payments in your budget as well.
If your current income doesn’t adequately cover your expenses, consider cutting costs on nonessential splurges like subscriptions, dining out, and shopping. Try to live frugally and think about living with roommates or moving in with your parents to save money. If you have extra time, starting a side hustle or getting a second job might be smart options for extra income.
Manage Your Debt
While attending college is beneficial, it can also be expensive, leaving most students with student loan debt. That said, as a new college graduate, one of your biggest priorities should be paying off and eliminating debt.
Be proactive and make a plan to manage your debt, whether it’s for student loans, credit cards, a car, or anything else. You should account for these payments in your monthly budget and make sure to pay these bills on time to protect your credit score from being lowered.
When it comes to debt, try to go beyond your minimum monthly payments to avoid paying extra interest. The faster you can pay off debt, the faster you can use that money for a better purpose. Try to pay off loans with the highest interest rates first, and work your way down. It might be worth refinancing your loans to secure a lower interest rate, which will save you money in the long run. If you’re a homeowner, you can also take advantage of your home’s equity to tackle your debt. Although you’d be taking out another loan, this option gives you the money in one lump sum so you can immediately start paying off high-interest loans that may be ruining your credit and other financial goals.
Start an Emergency Fund
This past year has shown us just how unpredictable life can get, and transitioning out of student life makes these changes even more daunting. That’s why it’s important to create an emergency fund to prepare for any unexpected events or life-changing circumstances like losing a job, getting into an accident, or having a baby.
Generally, this fund should cover three to six months worth of expenses to give you extra security and a strong financial cushion should anything go wrong. This should be one of your biggest priorities as a college graduate, but don’t feel like you need to have this money saved immediately. This is definitely a long term goal, but will set you up for financial success as you
grow older and have more responsibilities.
Plan Ahead for Retirement
Although you just started your career, you should start planning ahead for your financial future as soon as possible. Retirement might seem ages away, but the money you start saving now can make a huge difference later on.
Especially as a young college graduate, compound interest is your best friend. Start saving for retirement and invest early to receive the best return on your money. If you have a job, enroll in your employer’s 401(k) program and ask about a company match. If you can’t enroll in that, consider opening a Roth IRA account for retirement and research other ways you can invest your money for the future.
Remember, it’s never too early to start saving for retirement. This can be a smart use of any extra disposable income and can set you on the path for financial independence.
Being a new college graduate can be stressful and confusing, but your finances don’t have to be part of the problem. As long as you live within your means and plan ahead for financial milestones and hardships, you’ll create a strong foundation for financial wellness.