Money Advice for New Graduates
Congratulations! You’ve graduated! Finishing college is a huge accomplishment and a great investment in your future. While the stress of group presentations, thesis papers and last-minute cramming for exams is officially behind you, you may now find yourself looking ahead and thinking “Now what?”. Whether or not you have your first job lined up, post-college life might not be the financial paradise you thought it would be. No matter how much money you make right out of college, you can begin preparing for your future, eliminating your debt and working towards financial freedom as you navigate life as a new college graduate.
It can be tempting to blow off a little steam after graduation, but learning to live below your means and splurging very occasionally so that you can meet a savings goal every month is essential. Though it may seem obvious, building up your savings account as soon as possible allows you to pay yourself first and will guarantee that you will have money in the future. Try to save 20% of every paycheck, but if you aren’t able to start this high, even 5-10% of every paycheck will still add up over time and make a difference.
Establish an Emergency Fund
Unforeseen financial emergencies can, and likely will, happen to everyone at some point or another. To avoid last-minute panicking or racking up a huge credit card bill to cover the unexpected cost, start building an emergency fund. While many financial experts recommend 3-6 months’ worth of living expenses, even starting with a $1,000 fund will give you peace of mind if and when something unexpected comes up down the road.
Know Your Credit Score (And Learn How to Improve It)
Your credit score can determine whether or not you are approved to rent an apartment or qualify for a home or auto loan. Even if you aren’t planning on buying a home any time soon, it’s important to know your credit score and work to maintain it if it’s good, or improve it if it isn’t.
Most student loans have a six month grace period after graduation in which you are not required to start making payments, but starting to pay off your loans during this time will eliminate your debt quicker and can decrease the amount of interest you end up paying in the long run. In addition, making more than the minimum required payment on both your student loans and credit cards will not only improve your credit score but eliminate your debt faster.
If tackling both of these at the same time isn’t financially feasible right away, consider the snowball debt reduction strategy— begin by paying off the debt with the smallest balance first, while still making the minimum payment on your larger balances. However you decide to tackle your debts, the quicker they are eliminated, the quicker you can start using that money for other purposes.
Learn to Budget
You’ve likely already had some practice with budgeting while you were still in college, but it’s a bit more high-stakes once you’ve graduated. Many use the 50/30/20 rule, in which no more than 50% of your after-tax income should be spent on necessities like housing, groceries and insurance, no more than 30% of your after-tax income on wants like your cell phone plan, shopping and hobbies, and at least 20% of your after-tax income repaying debts, saving money or building your retirement fund.
However you choose to your allocate your paychecks, always make sure that you are paying your bills on time and building your savings. By knowing that budgeting doesn’t limit your freedom, but rather it givesyou freedom, you can start setting yourself up for success and avoiding unnecessary debts in the future.
Most importantly, be patient with yourself and take it all one step at a time. A high paycheck right out of college is rare, and completely eliminating your debts right after graduating is even rarer. Though it will take some time, by learning to live below your means, regularly putting money into savings and being mindful of your spending habits, reaching financial freedom in “the real world” is very attainable and will alleviate financial stress as you adjust to post-college life.
Valley offers competitive rates and a variety of both personal checking and savings options that can help you achieve your post-graduation budgeting and savings goals. Stop into your local branch to visit with one of our friendly and knowledgeable member representatives today!