Post-College Finances 101
College is often thought of as the place where young adults build the foundation for their career and an independent adult life. However, financial skills are equally important to success after graduation.
College is often thought of as the place where young adults build the foundation for their career and an independent adult life. However, financial skills are equally important to success after graduation.
When you start working, figure out how much money you have to cover expenses after everything is taken out of your pay, including taxes, social security and insurance. You will have both fixed expenses, like rent, and variable expenses, like groceries and entertainment.
Track your spending and monthly bills to determine how much money is left over for discretionary spending.
Experts recommend keeping three to six months’ worth of essential expenses in savings at all times, but you don’t have to have that much when you are getting started. Instead, focus on making saving a habit and give your funds a chance to grow over time.
When you enter the workforce, be sure to enroll in a retirement savings plan. Ask your employer if they offer a 401(k) and if they contribute to employees’ accounts. If your employer does contribute, do your best to contribute the amount that they will match. For example, if your employer will match up to five percent, then you want to contribute at least five percent of your paycheck into your 401(k) so that you are not leaving free money on the table
Taking these steps now instead of later is likely to significantly increase the amount of money you have saved when you are ready to make big financial moves like buying a house and, one day, retiring.
Just as you wouldn’t put all your schoolwork off until it became overwhelming, don’t do so with your student loans and other debt. Most students are given a six-month grace period after graduation before they must begin repaying their loans, but the sooner you start, the more interest you will save. If you have federal loans and find that your monthly payment is too high, you can apply for an income-driven plan. This allows you to make payments based on your income and family size and leaves money for other expenses.
Building credit is like building your resume. Every step you take — paying off credit cards, making car payments or paying rent on time each month — is a step closer to a better credit score. When you add jobs and experience to your resume, the goal is receiving a job or internship offer. With a good credit score, the benefits could include being approved for a mortgage, auto loan or new credit card. By monitoring your credit score online, you will be more aware of what lenders may see and you can detect any inaccurate or incomplete information that could be hurting your score, as well as any possible fraudulent activity.
Having someone that you trust to ask questions and consult with about your finances is crucial. Build a strong relationship with a banker just as you did with your college advisor so that you have expert support to achieve your financial goals.
Post-college life can feel overwhelming when it comes to jobs, housing and expenses. By following these simple tips, you can start yourself off on the right foot and gain the knowledge to make wise financial decisions.
