For some, it’s the first time doing all three of these things. Being financially responsible is incredibly important to your adulthood.
Here are some tips for managing your finances and shaping your financial future.
Create a Budget
One of the top priorities for your post-grad life should be creating a budget to help you navigate the real world. Understanding how much money you earn, how much you spend, and how much you have to put away into savings is important to your financial success outside of college. There is no singular budget that works for everyone, but this list includes a few types of budgets to help you determine what will work for you:
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50/30/20 budget:
This is a budget where you spend 50% of your income on your needs (bills, food, and living expenses), 30% on your wants (entertainment like streaming services and going to the movies, dining out, and shopping), and 20% of your income goes to your savings.
This is a great method for prioritizing your needs over your wants. If you’re someone that struggles with reducing your frivolous spending, this may be the budget for you.
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The zero-based budget:
This is a budget where you determine where each cent of your monthly income goes, down to the smallest detail. This involves a deep dive into your expenses each month.
You track everything that goes in and out of your account, every grocery trip, every phone bill, and every deposit made. The result should be that your budget will end at zero at the end of the month.
This is a budget that can work well for those that need structure to keep them balanced.
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Pay-yourself-first budget:
This is a budget that prioritizes saving and debt repayment. When you get paid, you first give yourself a certain amount of that money to put toward savings and paying off your monthly debts. From there, you can spend the rest of the money on whatever you choose.
Using this practice will make you focus on paying your loans and bills, as well as put your savings account in the forefront of your mind.
Make Saving a Priority
Creating a budget will introduce you to the value of saving money. Being able to account for all of your earnings and where they go will show you how much you can put toward your savings and your goals. You can have short-term goals like saving for a vacation or long-term goals like purchasing a car.
There are different ways to go about saving money. Some people enjoy turning the act of saving into a game by utilizing hacks they see online, such as the envelope challenge.
This is a method in which you write the numbers 1-100 on a pack of envelopes, and every day you select an envelope at random. Whatever number is on the chosen envelope is the amount of money you put into it. This gives you the opportunity to save over $5000 at the end of the challenge.
If making this a daily task seems overwhelming, you can change the frequency of your envelope pulling. Perhaps starting off with once a week, or even every time you get paid will feel more appropriate for your budgeting needs.
Others make saving a more practical task and set up direct deposits into savings accounts with each paycheck. Doing this removes the temptation to spend that money if it’s just sitting in a checking account.
Growing your savings account will allow you to earn more money based on interest. When you start to strategically save, you can look into different account types your money can grow in.
Things like certificates of deposit and money market accounts allow your funds to earn interest faster than normal savings accounts, but they require a larger balance in the account in order for the interest to accrue.
Branching out into different accounts can seem stressful to those not familiar, so starting simple with a normal account will help you start your saving journey.
Pay Off Your Debts
A major part of your financial journey after college is your credit score. Your score will impact many areas of your life.
If you’re in need of a loan, and you have a poor credit score, lenders may deny you or have you pay a higher interest rate than those with good credit. If you’re looking for housing, a credit check can impact your approval to rent an apartment.
There are many things that factor into your score, such as your debt-to-income ratio, how many new loans you have, and how much you owe on those loans.
Consistently paying your loans on time, and even paying them off faster with larger payments, can help increase your credit score. If you find yourself overwhelmed by monthly payments for multiple loans, you may consider consolidating your debt to make them more manageable.
Bringing down your monthly payments will allow you to save money faster and keep you from falling behind on bills. Taking control of your debt after college will set you up for a lifetime of financial security.
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After graduation, student loans are usually on pause for a period of time, but it’s still crucial to take that repayment plan into consideration. If you don’t account for these loans in your budget, and you’re already struggling to make ends meet, you may find yourself in a financial hole that’s hard to escape when that grace period ends.
Something you can do to prepare for your student loan payments is open a separate savings account to deposit money into each month. Making this deposit feel like a payment to yourself ahead of time can help you prepare for paying the student loans when they are actually due.
Taking your financial future seriously is an important step in the post-grad world. From making a budget to knowing the value of having a savings account, knowing how you spend your money and how much money you have is vital to living your best life as a college graduate.
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