3 Essential Personal Finance Tips for Young Graduates
Many young graduates often feel overwhelmed when they finish college, simply because they are afraid to conquer their ‘new world’. Sometimes, the world can seem like your oyster especially when you’ve recently graduated from college.
At this point, fresh graduates think of getting a job with a full-time salary on the horizon. However, majority of them fail to learn how to manage their finances before landing that full-time job.
Even though you have a degree in-hand, you may find it difficult to find a suitable job that suffices all your needs. To make it worse, you may find yourself underpaid simply because you just graduated from college. Hence, you should be prepared to handle any challenges that may come your way as a fresh graduate.
You may have expectations that life after college will be paradise, but that may not be the case. In fact, it may get more complicated if you have no plans at all.
No matter how much or little you make, you can do your best to prepare for post-graduate life by putting your finances in order. Here are some essential tips that will help you get on the right track.
Find Frugal Fun
As a post-graduate, you may often experience fear of missing out (FOMO), especially if you were used to partying a lot or having fun. Well, I am not saying that it is bad to have fun, but you should consider limiting it to a certain level. You can still have fun while you save some money.
Having a good time does not mean withdrawing from your fledgling emergency fund, using your credit cards more often, or breaking the bank.
- Utilize Free Activities Around You. Look around and you will find many free activities near you. For example, you can visit your local library and borrow all the music, movies and books you want, totally for free. Go for a hike along a trail, visit a local park and spend a few hours reading in the grass, or find out when local museums offer free admission.
- Hold a Movie Night. Going to the movie theaters can be expensive when you are a fresh graduate. Instead, consider holding a movie night with your friends; grab some popcorn bags and sit back to enjoy the movie. You can pick a film from Amazon Prime, Hulu, or Netflix.
- Learn to Cook. Cooking is an essential skill if you want to impress a date or host a dinner party. You can save money when you choose to cook at home instead of ordering takeout food.
Prioritize Your Goals
Learn how to prioritize your goals by focusing on the goal that matters more to you. What’s your priority, is it to pay down debt, save for a major expense (such as a new car, home, or vacation), an emergency, or for retirement?
Often times, when people graduate from college, they focus on repaying debts, saving for retirement, and saving for an emergency. After clearing your debts, you can then focus on saving for the big things in life, such as a home or a fun vacation.
Take note that you can adjust your priorities with time no matter what goal you put first. When it comes to financial goals, speaking with a financial planner can be the best option, especially if you are not sure where to start from.
A financial advisor can show you the pros and cons of paying off any debt rapidly versus focusing on retirement savings.
- Start Saving for Retirement. It is advisable that you start saving for your retirement right now even though it may be decades away at this point. You can do that either in an individual retirement account (IRA) or through an employer-sponsored plan.
- Create an Emergency Fund. Your emergency fund should be at least six times more than your monthly income. The money is meant to cover you if you lose your job, car trouble, or have a high medical bill. You can start establishing an emergency fund by contributing what you can afford after debt payments, retirement savings, and necessary expenses.
- Repay Debt. It is advisable that you make at least minimum payments if you have debts to clear. First, focus on loans with high interest rates like credit card debts.
Control Your Credit
As a college graduate, you probably left college with a credit card or two in your name. Like most fresh college graduates, it is easy to let your credit score go down the drain especially if you don’t pay the balance on a monthly basis.
Trust me; it makes a financial sense to give priority on paying off the credit cards first if you do have a mix of credit card debt and student loans. The reason behind this is because the average student loan interest is lower than the rate you pay on your credit card interest. Hence, paying off the credit card should always come first.
Be wise on the decisions you make when you are a fresh graduate because they may cost you when you are in your 30’s or 40’s. Think carefully before opening any credit card account. If you already have one, then pay on time to raise your credit score, or keep it as low as possible (if not zero).
- Don’t fear credit. Many fresh graduates often get scared of credit, but that shouldn’t be the case. Take note that credit cards can help you accomplish your financial goals and help you get ahead in life. For example, when you are planning to have a home mortgage loan, then a credit card will come in handy. You can consider using your credit card to maintain a good credit score and build your credit history. Hence, don’t fear borrowing completely. The most important thing is to ensure that you borrow the amount that you can comfortably pay back before the due date.
- Monitor and guard your credit always. Keeping a regular eye on your credit records is essential towards securing your credit card. Don’t wait until you get surprised with unlawful hacks to your account. Don’t log into your credit or bank account online if you are using an open internet connection. And keep thieves away from getting your details by shredding any paperwork regarding your account.
- Always Pay on Time. Late payments, whether on credit cards or student loans, can sting financially and even lower your credit score. You will negatively affect your credit score if you regularly pay late.
As a fresh graduate, you may still be overwhelmed with your financial status, but the earlier you put things in order, the better. Keep a keen eye on your financial goals and prioritize on more important goals. Don’t spend more than you can afford and always think of your future.
Written by JobTeaser