Personal Finance Tips
After years of classes, essays, projects, and exams, you have finally walked across the stage, received your diploma, and flipped the tassel on your graduation cap. Congratulations! This is a significant achievement that marks a transition period in your life. Whether you're interviewing for jobs, applying to grad schools, or working your first post-grad position, it is important that you sit down and take a look at your financial situation. How will you pay off your student loans? When should you begin saving for retirement? Do you know how to juggle your new expenses? Whether you already have your degree or you're set to graduate this spring, check out our personal finance tips for recent grads
Personal Finance Tips for Recent Grads
Build an emergency fund. Your first priority should be building an emergency fund. Experts vary on how large this fund should be, but three to six months of living expenses should be sufficient. Every time you receive a paycheck, immediately put some money into your savings account for emergencies so that you aren't tempted to spend it. This money should only be used in a true emergency - you've been laid off, your car breaks down, your roof requires a repair, etc.
Start saving right away. Once you've created an emergency fund, start saving for the future. Retirement may seem lightyears away when you've only just entered the workforce, but it will be here before you know it. Plus, the earlier you start, the more you can save. If you wait until your 30s to begin saving for retirement, the money won't have as much time to grow. Remember that your retirement savings shouldn't just be kept in a savings account; they should be invested. Make your money work for you! If your employer offers a retirement plan like a 401(k) plan, take advantage of their matching contributions. If not, consider opening an IRA for your savings.
Reduce your debt load ASAP. Most graduates these days are unfortunately carrying a large load of student debt. Work your monthly loan payment into your budget, so that you can begin whittling down the total amount you owe. In addition, consider using a payment plan like the Pay As You Earn Plan or Income-Based Repayment Plan to reduce your monthly payments based on your income.
Live within your means. As an employed young adult, you may be tempted to "live it up" and spend your money frivolously - dining out often, buying expensive gaming systems or clothes, taking out an auto loan for a pricey car, traveling indulgently with friends, etc. However, this is a recipe for financial disaster. Learn to live within your means - living below your means if you can - and only splurge when you can afford to do so. This will help you avoid debt and save for the future.
Embrace frugal fun. One of the best ways to live within your means is to embrace inexpensive activities. For example, picnic in the park instead of eating out. Have a movie night at home instead of heading to the theatre. Seek out the best happy hours in town for affordable drinks. Hopefully your friends are also interested in saving money and will enjoy having fun frugally with you!
Create a budget and stick to it. Especially if you don't have a clear sense of your expenses, create a firm budget. First, if you have an income, learn how much you receive each month after taxes. Then, write down your fixed monthly expenses (rent, utilities, loan payments, insurance payments). Next, do a little research to create a ballpark figure for other common expenses (groceries, gas, toiletries, entertainment). Finally, factor in the amount of money you need to save each month (for your emergency fund, retirement savings, etc). Hopefully, your income will cover all your expenses. If not, decide where you can cut back. Keep track of your spending each month as well to avoid going over your budget.
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Using these personal finance tips for recent grads, you can achieve financial independence and create a solid foundation for the future. As the years go by, take a little time to learn more about investing, budgeting, and borrowing money, so that you can hone your skills. Finally, don't be afraid to ask your parents, your friends, your accountant, or even your credit union for help. You might be surprised how many people have useful personal finance tips for recent grads.
Speaking of which, are you interested in joining a credit union? If you live or work in southwest Missouri, check out BluCurrent Credit Union. With our unbeatable loan options, 6,800 shared branches across the country, and fantastic customer service, we might be the perfect financial institution for you. To learn more about our services and benefits, please stop by one of our branches or explore our website.