After graduating with a bachelor’s degree in English and business management, I was well-versed in metaphors, marketing, and Russian literature. Still, I needed to gain knowledge of personal finance management. This is a common issue among recent graduates, who often face financial questions like “Should I get a credit card?” or “How much should I spend on groceries?” or “Do I need to start saving for retirement?” Managing one’s financial responsibilities can be daunting, but following certain practices can help individuals manage their money well. This article will discuss seven healthy financial tips I wish I had known after graduating college.
Exploring Various Employment Opportunities
Finding your dream job right after college can be challenging. While some may have the opportunity to land their dream job, others might need to start with an internship or an entry-level position in an industry or company where they can work their way up. There are multiple paths to making a living and pursuing your dream job; sometimes, an unexpected opportunity can lead to the perfect career. For example, my first job as an admissions counselor wasn’t a direct step toward my writing profession. However, the sales experience I gained prepared me for my current job as a writer in marketing. Additionally, I gained valuable office experience and a better understanding of how a business operates, which could help me manage my bakery in the future. In conclusion, it’s essential to keep an open mind and not be so focused on finding the perfect job that you miss unique opportunities to advance your career.
Budgeting Basics: A Guide to Managing Your Finances
In the early stages of our relationship, my husband and I were thrilled to find that we shared similar personalities. However, we had different approaches to personal finance: I am a spender, and he is a saver. We realized that creating a monthly budget would be crucial to protecting our finances and marriage. We sit down with a cup of tea or wine every month and review our expenses. Developing a budget and routine that worked for us took some time, but it saved us from many arguments. Budgeting is vital for maintaining financial health, whether single or in a relationship. Fortunately, tools like YNAB make it easy for anyone to manage their money successfully. YNAB allows you to plan and track your spending by setting up categories. Its unique approach lets you “live on last month’s income,” allowing you to break the cycle of living paycheck to paycheck. With YNAB, you’ll always know how much money you can spend.
Why You Should Begin Paying Your Student Loans Immediately
After graduating from college, many young adults receive a six-month grace period before they must start paying back their loans. However, financial experts recommend that graduates start paying back their loans immediately, even before graduation, if they can do so. Paying down debt sooner can reduce the principal amount and save thousands of dollars in interest over time.
Another way to potentially save money is to refinance your loan to a lower interest rate. Credible is an online marketplace that allows you to compare rates from multiple lenders based on your unique credit profile. Each quote is updated in real time so that you can get an accurate assessment of your offers. Remember that when you apply for credit, a full credit report will be requested, which is considered a hard credit pull and will affect your credit score. To check the rates and terms that you qualify for, Credible or their partner lender(s) will conduct a soft credit pull, which will not affect your credit score.
Creating a Reserve Fund: A Step-by-Step Guide
While an emergency fund is undoubtedly valuable, over half of Americans would need help to afford a $400 unexpected expense. Often it’s only when we require it that we truly appreciate the significance of an emergency fund. For instance, I felt ashamed and embarrassed after receiving a ticket for running a red light until my husband reminded me that we had an emergency fund. The immediate relief I felt was immense.
To build your emergency fund, consider utilizing the Wealthfront Cash Account. You’ll quickly see your savings grow by earning an impressive 4.55% APY on all your cash, which is five times the interest of your average savings account. With Wealthfront, you can even receive your paycheck up to two days early when you set up a direct deposit. Additionally, you can organize your savings into buckets to track your progress as you work towards specific financial goals.
Wealthfront is also an excellent option for those looking to start investing. Many financial advisors will only consider working with you if you have tens of thousands of dollars. Wealthfront allows you to begin investing with as little as $500. They will even diversify your portfolio to match your personal risk tolerance. By integrating your Cash Account with your investment portfolio, you can automatically invest any leftover income, maximizing your time in the market.
Living Below Your Means
After receiving your first paycheck, assuming you need your entire salary to maintain a comfortable lifestyle may be tempting. However, each individual is unique, and the same goes for wages.
My brother recently graduated from college with a degree in computational engineering (yes, he’s a nerd). His first job pays almost three times more than my first job. Before he indulged in a new TV, car, computer, etc., I gave him one small piece of advice: learn to live on less.
Instead of determining your expenses based on your salary, start by setting small budget categories and adjusting them when necessary. Steve and I began budgeting early in our marriage and believed we would need $200 monthly for groceries based on our spending habits. However, as time passed, we realized that $200 wouldn’t meet our needs (especially since I love cooking), so we gradually increased our budget until we found a total that worked for us.
The first few years after college will significantly impact your financial well-being for decades. Therefore, learning to live on less is crucial. It’s much easier to increase your budget categories later than to restrict yourself in the future.
Starting Your Retirement Savings
If you’re like me at 22 years old, you might be tempted to ignore the topic of retirement. However, it’s worth noting that saving for retirement early can mean thousands of extra dollars for you and your family later in life.
Luckily, some companies cater to young people such as us. Bloom, for example, is a retirement management firm that provides a complimentary analysis of your IRA and employer-sponsored retirement plan, regardless of whether you sign up for their services. After answering a few questions on their website, Bloom offers professional advice on adjusting your fund allocation to save more for the future and avoid hidden fees.
Unlike many investment management firms, Bloom is particularly helpful for 20-somethings because they don’t require a minimum investment to manage your retirement plan. In other words, if you’ve just started your first job out of college and have barely contributed to your retirement plan, Bloom is still ready to assist you. They can also manage your funds from wherever they are, so you don’t have to move your employer-sponsored plan to take advantage of their services.
How to Obtain a Credit Card
To clarify, I am not recommending you go to your favorite department store and sign up for their rewards card, offering a one-time 10% discount.
While credit cards can have their benefits, the most crucial advantage for college graduates is how they impact credit scores if used responsibly. A good credit score can affect your ability to pay a mortgage or get auto insurance. It may even influence a potential employer’s decision to hire you!
For the first year, start with just one card. Look for options with low-interest rates that require minimal spending to receive rewards. After obtaining the card, set up automatic payments with your bank and regularly monitor your transactions and fees.
Remember that having a credit card does not improve your credit score; it’s all about how you use it. Credit cards can positively and negatively affect your life, so choose and use them wisely.
Summary
Starting on the right foot is critical to healthy money management as a college graduate. Make sure to complete things correctly. When job hunting, consider a wide variety of options. Building a career takes time, and you may need to start with entry-level positions or even an internship to get your foot in the door. Once settled into the workforce and receive paychecks, create a budget that includes essential goals like paying off student loans and saving for retirement. Finally, develop habits like living on less and saving for unexpected expenses to help you prepare for the future. Procrastination may have worked in college, but it won’t help you achieve financial health. Act intentionally, and learn to manage your money well now to provide for your family, pursue new experiences, and be prepared for whatever lies ahead.