So you’ve just graduated – CONGRATS! Your hard work, perseverance and determination have finally paid off. We understand, though, that along with the excitement of celebrating this landmark achievement may come some uncertainties about what’s next. If finances are among those uncertainties, here are some tips that may help you budget, save money and plan for your financial future:
1. Set goals for yourself. Before you do anything else, identify your short- and long-term financial goals. Do you need to buy a car? Find a new apartment? Buy interview or work clothes? Would you like to save to buy a home in five or 10 years? Your goals may be quite different from those of your friends or family members, so don’t worry about how they “stack up.” These are your goals: Think about what’s important to you and what will motivate you to build good financial habits.
2. Create a budget. If you weren’t a regular budgeter in college, getting started now may feel intimidating, but (a) creating a budget can actually be quite simple, and (b) there are plenty of budgeting apps and software programs available to help you. By setting up a basic budget that lists all of your monthly expenses, you gain visibility into how your expenditures align with your income. You can see where you may be spending more than you need to and reallocate those funds toward those short- and long-term goals you just defined.
3. Start saving. Financial experts suggest having enough savings to cover three to six months’ worth of living expenses in case of unforeseen circumstances. Determine a percentage of your earnings that you can comfortably deposit into your savings account each month. If you include this in your budget, you may be surprised to see how quickly (and easily) even a small amount can grow into a comfortable nest egg.
4. Pinch pennies. As you begin the next phase of your life, you may be tempted to celebrate your independence by buying whatever you want. Think instead about building healthy financial habits for life. Over time, the money you can save on simple things such as making your lunch at home, brewing your own coffee or purchasing a used car instead of a new one can really add up.
5. Start paying off your student loans. Tackling student loans can seem daunting at first, but it doesn’t have to be. Relax and organize: Tally up how much you owe, note the various interest rates and understand what type of loans (federal, private or both) you have taken out and what the repayment terms are. Knowing these specifics can help you get your arms around your financial commitment and relieve the anxiety of the unknown. Then be sure to make your loan payments on time. You can also pay more toward the principal of these loans as your financial circumstances allow, to reduce the accumulation of interest and pay the loans off faster.
6. Work on your credit score. A good credit score can be key to making those longer-term purchases on your list. Solid credit may also lead to benefits including better rates on insurance, a mortgage and loans. To strengthen your score, make all of your payments (student loan, car loan, credit card, etc.) on time, every time; keep your credit balances low; and pay off any debt you incur as soon as you can. You can request a free copy of your credit report once each year from the three major credit reporting bureaus — Equifax, Experian and TransUnion — through AnnualCreditReport.com. Review these reports closely and report any mistakes to your information or activity to help keep your credit report and score on track.
7. Think about retirement. You’re just starting out on your career journey; why think about retirement already? A better question: Why not? Depending where you work, your employer may offer a 401(k) plan and match your contributions to a certain percentage. Essentially, that’s free money toward your future. If your employer doesn’t offer a 401(k) plan, you can open your own individual retirement account (IRA) to save for the future. These retirement savings are tax-deferred, meaning your contributions to your plan are taken out of your paycheck before taxes are deducted (you don’t pay income tax on the money until you withdraw it at retirement).