This is a guest post written my our Marketing Intern, Madison.
Graduating from college is no small feat and what comes after can be a brand new challenge. For most, this is when they get their first full time job, become financially independent, gain new responsibilities, and much more. During this time, it can be challenging to manage your money (especially now that your parents aren’t doing everything for you). Here are five things to know and do after finishing school to help manage your money:
Make a Budget
Your first step should be to make a budget. Remember the saying “live within your means”? Well a budget will help you do so and prevent unnecessary stress over money. There are many budgeting apps out there that can help you get started.
Begin with your income and calculate your take-home pay: your income after taxes, 401(k) contributions, and healthcare. Then look at your expenses. Start with necessary expenses like living expenses, transportation, phone bill, loans, groceries, etc. Remember that just because these expenses are necessary, they aren’t fixed. Don’t overspend on a fancy apartment, an expensive new car, or overpriced groceries which will consume your budget and take away from your other expenses and opportunities.
Then look at what you have left to save and spend on things you enjoy like going out, buying clothing, traveling, and going to concerts. It can be tempting to spend all this money on fun things, but make sure you put some money each month. Save for both the short and long term. You should save for the future, but you can also save for a fun trip that you have always wanted to go on.
Pay Off Your Debt
Recall those student loans you took out not so long ago? Start taking care of them now before they accrue interest and end up costing you a whole lot more. If you have multiple loans, identify which one needs to be paid off first. Pay off the loan(s) with the most interest to save you money in the long run. If you took out a Federal Subsidized loan, use the six-month grace period after school to focus on other loans you may have.
Another type of debt you should pay attention to is your credit card debt. Interest rates on credit card debt are very high and have the additional consequence of lowering your credit score. This can affect you in the long run when you have trouble getting a loan for buying a house or car. Even if you can get a loan, a bad credit score will yield a higher interest rate on the loan, costing you more money.
Find Little, or Big, Ways to Save
Even though you are now financially independent, that doesn’t mean that you must pay for everything yourself. After having one or more roommates in college, it might be tempting to get your own place. However, you can save on rent and other associated living expenses by living with a roommate which will give you more money to spend in other areas of your budget. Another option is to live with your parents if they’re nearby. It doesn’t have to be long term, and it probably shouldn’t, but you can use the money you would have spent on rent for savings.
Does your family or friends have a Netflix account or other subscriptions? Adding multiple screens costs less than paying for another account, so pay the additional cost to your family or split a subscription with your friend.
Going out and exploring new restaurants can be fun, but make sure to stick to your budget. Consider buying a cookbook or looking for recipes online where you can make food from home to save money. Grabbing some coffee on your way to work can add up, so invest in a travel mug and make your coffee at home.
Saving Your Money
Here is one word that doesn’t come to mind at this age: retirement. Even though it’s relatively far into the future, it’s never too early to start saving. Start by learning about your company’s 401(k) plan. If your company has a matching program, try to take advantage of it by contributing the maximum match. This is the closest thing to ‘Free Money’ you will ever get.
Now that you are making enough money to save, research how to invest your money. Talk to family and friends and ask for advice. It’s good to have some money in your checking account in case of emergencies, but the money sitting there isn’t doing you any favors. By investing your money, you can substantially increase its value over time for retirement or big purchases like a house.
Have Some Fun
Don’t forget to enjoy your newfound financial freedom by using some money on things that you enjoy. After four-plus years of school, it’s time to treat yourself a little. Go on a fun trip with friends and family or go to that concert that you always wanted to go to. There are many ways to have fun by spending little or no money too. Spend some time exploring the city, find free public events, or try some outdoor sports.
It’s important that college grads start good habits managing their money that will carry on throughout their life and payoff in the future. No matter if you make a little or a lot of money, it’s essential that you learn how to manage it.