College graduation for many young adults marks an important process of growing up and moving into the post-graduate employment world. It also launches a new period of financial planning.
Some of the choices you make in your 20s can have major repercussions later on in life. One of the biggest issues that face young people are finances. When you’re young it can seem like you’ve got years to worry saving and spending. And then all of a sudden graduation hits.
Life after college may not be the financial utopia you were expecting. You may wish somebody had told you how tough it would be. For recent college graduates, here are some pieces of financial advice to help you get on to the right track.
Make a Personal Budget
Consider a budget as an expense plan to manage your spending and saving so you can obtain both the things you really need and some things you would really like to have. Don’t let yourself get manipulated into living a lifestyle you can’t afford.
You add up your income and expenses when you make a personal budget, then compare the two. There are a variety of methods of budgeting available, and it can take some time and a few mistakes before you figure out a plan that really works for you.
Diversify Your Income Streams
Many people believe that a full-time job is enough and a side hustle is too hard. Side-hustling is not just a cash grab, it’s also useful for developing and building skills.
The trick with a side hustle is that you can multiply that income for your future. Every dollar you make in your side hustle, invested prudently, may be worth double or triple as much in the future.
You can make more money and diversify your risk when you diversify your income sources so if you lose one revenue stream you can depend on another.
Start Saving and Investing Now
When making your budget, make sure that savings are integrated into your “expenses” calculation. This means establishing an emergency or “rainy day” fund, saving up for bigger purchases in the future, and contributing to a retirement fund.
If you are lucky to have access to a 401(k) employer retirement program, use it! If they offer some kind of match for contribution, seek to maximize it.
Otherwise, open an IRA and start making contributions there. You will significantly affect your future financial stability by beginning to prepare for retirement in your 20s.
Control Your Credit
If you’re like most modern college graduates, you’ve likely left school with fairly substantial student debt. You may have one or two credit cards under your name, too.
In your early post-school years, it is fairly easy to let those two sources of debt spiral out of control, especially if you get a credit card shortly after college or with your first job and don’t pay off your balance every month.
If you have a combination of student loans and credit card debt, concentrating first on paying off the credit cards makes financial sense. The average interest rate on the credit card is significantly higher than the rate you pay on your student debt.
Concentrate on maintaining your credit card debt as low (if not zero) as possible, raising your credit score by paying on time, and making wise considerations before opening new accounts.
Find Frugal Fun
You have been working hard at college to get to where you are now. Even if you start financially and want to lay the foundation for a stable financial future, it doesn’t have to be all fire and brimstone or all the investments and no play.
Give yourself time every month to have a bit of fun in your budget, even if your funds are tight. Making a great time is not about spending a fortune, maxing out your credit cards, or withdrawing from your emergency fund. Enjoy while saving some money.
Bottom Line
When it comes to working on your finances after college, there could be a huge learning curve, so the faster you understand the state of your financial health, the better off you’ll be. Be cautious about your money, and consider the future whenever you feel like spending more than you can afford.
