Most teenagers dream of growing up and becoming financially independent from their parents. However, after they graduate from college and reach that point in their lives, the reality often doesn’t seem as good as they thought. A job, school debt, bills—it can all be too much to take in all at once. So, if you’re a recent graduate or about to graduate, this article is for you. We’ll teach you how to create your financial plan and go over some of the best financial planning tips for recent college grads. Good luck!
In this post:
Calculate Your Budget
The first thing you should do is grab a pen, paper, and a calculator and figure out your monthly and annual earnings. You could also use Google docs and spreadsheets to do the same thing. Or, find one of the many financial calculators available online to do the work for you. Either way, you need to list all your expected revenue streams. This can help you decide how to divide your money, how much you will have available to spend, save, or put toward paying off your loans. Even after you’ve set up a budget, you should continue to track your monthly expenditure so you can check for areas where you’re overspending. It’s critical to strike a balance so that your monthly payments don’t exceed your income.
Get Healthcare Coverage
Unless you had healthcare as a college student, you might be unfamiliar with this cost. Although it might be expensive, it is necessary to have health insurance so that you do not have to pay for unexpected expenses. It’s much more financially responsible to pay healthcare coverage than to blow out a big chunk of money at once when you inevitably get sick. Working for a business that provides insurance and healthcare benefits is also a great option to have things taken care of swiftly.
Make Saving a Priority
Usually, when someone gets their first paycheck as a college grad, the last thing on their mind is to put a portion of that money towards saving. This is partly due to the low salaries recent college grads get and the excitement they feel when they finally have their own money that they can spend any way they want.
So, if you want to be financially responsible and develop solid financial habits, one of our best financial planning tips is to make saving your priority. You can certainly save something regardless of how modest your income is. At this point in your life, the quantity is less significant than developing a saving habit. One of the most popular techniques is to set aside a percentage of your earnings in a savings account. This way, your savings will grow in lockstep with your income.
Learn to Invest
It’s critical to understand the difference between saving and investing money. You may start thinking about wanting to invest some of your surplus money in stocks, bonds, or other financial instruments once you’re comfortable with how much you’ve saved. However, keep in mind that investing is taking the risk of losing part (or all) of your money in exchange for the possibility of obtaining a larger return than savings and money market accounts. It’s very risky, and it doesn’t always pay off. In general, the larger the potential return on your assets, the riskier they are. When saving for long-term financial goals like retirement, it may make sense to take on a bit of extra risk in order to boost your retirement savings.
Pay Off Your Debt
One of our best financial planning tips for recent college grads is not to put off paying off your student loans and other debt. If you have credit card debt after graduating from college, it should be one of your first financial priorities. You should prioritize paying down debts by interest rates when determining which bills to pay off first. In other words, you should pay off the debt with the highest interest rate first. If your credit card balance has a high-interest rate, you might want to explore a 0% balance transfer. Finally, paying off your student debt and making regular credit card payments is a great way to increase your credit rating.
Consider Your Living Situation
When it comes to financial planning, another thing you should consider is your living situation. Are you spending too much money on your rent? (You shouldn’t spend more than 30% of your income on your rent.) Is there a better option? If you’re paying too much for your rent, you can figure out a way to lower your living expenses by moving to another city, state, or to your parents’ house. However, if you’re moving to save money, don’t forget to research various ways you can keep the costs down when moving long-distance. For example, you can try to DIY everything leading up to the move itself: preparing, organizing, and packing.
Thinking of Buying a Home?
As we said before, investing is a great option for everyone looking to boost their savings and become more financially stable. Investing in a home can be one way you can actually save money in the long run. Of course, you’ll need money for the down payment to buy a house, but after that, all you have to do is make regular payments towards your mortgage each month. It’s not so different from paying a high rent every month, except, in the end, you’ll own your home! You also won’t have to deal with the landlord or move frequently! It will give you a sense of freedom, but a lot of responsibilities come with it.
In Conclusion
When it comes to financial planning tips for recent college grads, our best tip is to get started as soon as possible! Saving a percentage of each paycheck can go a long way, and it will help you develop saving habits. You can lay a solid financial foundation for the rest of your life by studying and adopting fundamental personal finance tactics like these.
