Ready to hit the ground running? Here are some tips for the recent college graduate that you should know.
You Need To Set A Budget
The days of being the broke college kid are over. You will no longer be able to live paycheck to paycheck and be able to just get by. There are no freebies to fall back on.
Setting a budget is easy. All you need to do is open up a spreadsheet and write down all of your monthly expenses. Then, make sure that you make enough money to cover them. If not, you need to make some cuts and live within your means.
Don’t forget to set aside 10 to 20 percent of your take home pay as savings. This will cover emergency expenses and put you on the right road.
Keep Driving That Beater
I realize that you just graduated and you want to reward yourself but cars are expensive and can be a huge drag on your budget.
Instead of rushing out to buy a shiny new car, keep driving that beater. It has been good to you all through college and will probably continue to do so. Until you really get used to budgeting and living life as an adult, save the expense. You will thank yourself when you do not have to make a $500 payment every month.
You Need To Manage Your Credit Score
Having a good credit score will pay huge dividends. It will get you cheaper loan rates, cheaper insurance and could even help you land a job.
Good credit scores are not a given however, you need to work a bit at them.
The chief thing that you need to do is pay your bills on time. This is easier said than done for the average college kid. You are probably not used to making regular payments and the habit can take some time to develop. Consider setting your bills on auto pay to eliminate some of the responsibility. Besides that, set aside some time after each payday to settle your bills
The second big part of your credit score is managing your available credit. Keep your balances low, at least below 30 percent.
Don’t Overestimate Your Pay
If this is your first real job, you are in for a big shock. Your take home pay is not going to be anywhere close to your gross salary.
The deductions made will be seemingly endless. Before you get your money, you will pay income tax, social security, medicare, health insurance and your 401K contribution.
Your net income may come as a shock and guess what, its not going to go as far as you think. So, before you start spending like your rich, be frugal and see how far your paycheck takes you.
Stay In Touch With Your College Friends
This is something that you probably plan on doing but work and new responsibilities can affect your ability to do so.
One big benefit to staying in touch with the old college crowd is that they will probably be as financially needy as you. The friends that you meet at your new job may be a bit more established and be able to spend more. This might lead you down the rod of debt if you try to keep up.
Hang out with your old friends and you will probably be more likely to find much cheaper entertainment choices and stay within your means.
Make Your Student Loans A Priority
Chances are good that you are already thinking about deferment of your student loans. Most students leave school strapped with student loan debt yet plan on only paying the minimum.
Plan to pay off your student loans early and get this debt off your back. If you do not, student loan debt will haunt you. You will pay a fortune in interest and the monthly payments could affect your debt ratio, keeping you from home ownership.
Once you rid yourself of the student loans, you can start aggressively saving for retirement and do what you want to do in life.
Be Careful With Credit Cards
Once you graduate, you will be on the list. Credit card companies will be throwing themselves at you with seemingly great offers.
There will, in fact, be some good ones but be careful. It is all too easy to get carried away with credit card spending. Cash back offers, introductory interest rates and flyer miles sound great but these are just tools that the credit card companies use. Their goal is to get you to charge up their cards and then pay the minimum.
You do need a couple of credit cards to help you build credit but use them only for emergency. Grab a couple cards with no annual fee and use them for emergencies only. In fact, as soon as you get the physical card, cut it up. This will prevent yo from impulse buys.
It’s Time To Think About Retirement
You are just starting your career and retirement is probably the last thing on your mind but it should be front and center. Most people fail to plan for their retirement and end up struggling with it later in life.
Get ahead of the game and start planning now. Set aside a portion of your income for long term investing. When you start your new career, max out your 401K contribution. Even small contributions made today will pay huge dividends 30 to 40 years down the road.
30 to 40 years sound like a long time? Well, think about early retirement. Start investing in your twenties and you could be retiring in your forties. Where do you want to be in 20 years? Think about it now.
Getting your first place of your own is incredibly exciting but do not get carried away. You need to live within your means. Why pay for a bunch of amenities that you will never own?
Look for an appropriately sized place in a safe area, hopefully close to work. Look past things like granite counters, stainless appliances and useless amenities that you will probably never use.
Think about how much you will be in your new home. If you are starting a new career, probably not a lot. Save money on rent and put your extra cash into savings. You can then use your money when you buy a place of your own. Then you can spring for all the extras and actually enjoy them, knowing that they are yours.
Lastly, consider a roommate. I know that you want a place of your own but wouldn’t it be nice to split the bills in half. Besides, like I said, you probably won’t be home as much as you think anyway.