With graduation season in full swing, many college towns will soon be deserted for the summer and students will be moving on to new lives and new jobs. In today’s economic situation, many students are first moving back home with their parents to get themselves on their feet financially before committing to new housing situations.
Whether a student is graduating with no debt or significant debt from student loans, moving back home or moving to a new city, starting a new job or still in the job search, here are some basic tips every recent grad should follow to remain financially stable and responsible:
- SAVE. It goes without saying, but it is as important as ever to begin saving for the future. If you’re making the transition from a part-time college job to a serious full-time job, chances are your paycheck has increased significantly. While it may be tempting to spend, spend, spend, it is in your best interest to save, save, save. Start by setting aside a fixed amount each month to deposit into your savings account. (If you do not have a savings account, open one ASAP!)
- Start an emergency fund. Allocate part of your monthly savings goal for an emergency fund. It is recommended to keep three to six months worth of income in an emergency fund. You never know when you might be confronted with a surprise root canal, car break down, or even periods of unemployment. Having an emergency fund will help you avoid the temptation of using credit cards for unexpected expenses.
- Plan for retirement. You might think “I just started my first month of work, why would I start saving for retirement already?” With so many new post-grad life expenses, retirement may be low on your list of priorities. However, the earlier you save for retirement, the better off you’ll be in the future. Take advantage of retirement plans such as a 401(k) to kickstart your fund. Even if you contribute as little as $25 per week, you will be ahead of the game, especially because many employers will even match your contributions .
- Establish credit. While some may have started doing this in college, it is crucial that you begin building credit. Stick to using only one credit card. Do not charge more to the card than you can afford to pay at the end of the month. A good plan is to charge all of your bills to your credit card and pay the entire balance at the end of month. This will help you build good credit, which will prove useful in the future such as when it comes time to purchase your first home.
- Stick to the “starving college student budget.” The good news is that your budget will be one area that should not change during your post-grad life. When you receive your first “real-world” paycheck, it will be tempting to treat yourself to everything you sacrificed in college. However, if you stick to a modest budget, you will be able to save more and put more towards paying down student loan debts. Use your judgment; I am not suggesting you stick to ramen noodles, but do not inflate your lifestyle. Remember, it will be more difficult to change your spending habits when you get used to a more expensive lifestyle.
- Know your student loan repayment options and start paying any debts down. Even though student loan debt is often considered “good debt,” it is important to begin paying it down as soon as you possibly can. While it may seem tempting to defer your loans or pay the absolute minimum, it will not help you in the long run. You do not want to be carrying around student loan debt when you are buying a house, getting married, or having children.