Graduating from college is an exciting time in anyone’s life. Finally, you have what you need to be more independent. You are now able to get a new job so you can financially support yourself. But before you go and celebrate, there are a few money tips for new graduates that you may want to familiarize yourself with.
There are many habits that will threaten your future’s financial security and if you fail to correct them in time, you may end up in some form of debt crisis. It is not something that you want to happen after school. You want to be successful financially so you can pursue your dreams without hesitation.
Financial plight of the new graduates
Unfortunately, the current financial condition of students do not leave much room for a positive future. At least, not immediately. The American Student Assistance website, ASA.org, compiled a couple of statistics that will give us a look at the financial situation of new graduates and it shows that gravity of their student loan debt.
According to the data they have gathered, almost 20 million students go to college every year. Of that number, almost 60% or 12 million are forced to borrow money to pay for their school expenses. That means every year, we are sure that there are 12 million graduates who will enter the workforce with debt. That does not include the people who borrow money in the midst of their course or those who will incur credit card debt while in school
The batch of workers who are burdened with debt should give us cause for concern. These young adults will be unable to make investments because their money will be tied down by the debt that they have to pay off. It is clearly not a good picture for the future leaders of this country. This is why we have to provide money tips for new graduates.
5 financial tasks to do right after graduation
Let us start with the 5 financial tasks that they have to accomplish right after their graduation. The reason why we want this to be done as soon as possible is because they only have 6 months before the reality of their student debt sinks in.
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Know how much debt you owe. It is best to begin with the amount of debt that you owe for the time that you spent in school. Total the student loan that you borrowed and any other debt that you may have incurred. This includes credit card debt and other personal loans. An article published on the LibertyStreetEconomics.NewYorkFed.org revealed that the young and the riskless continue to increase the overall student loan amount. Consumers who are 30 and below have a high change in debt mostly because of their student loans. You want to keep this from ruining your life. That is why a thorough look at your current debt is on top of our money tips for new graduates.
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Take a look at your savings. The second task that you need to accomplish immediately involves your savings. You should look at the current situation of your savings. How much have you saved in your account – if you have any at all. If none, you need to find out how much emergency fund you need to have to survive an unexpected event.
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Create budget. By understanding your current financial position, you should be able to set up a realistic budget that will help you survive the months you will spend job hunting. While your parents will be helping you out up to this point, you want to ease the burden a bit. Make sure you know your priority expenses before you go out and celebrate your graduation.
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Determine your lifestyle. As you create your budget plan, you will realize the lifestyle that you can live. You know that your current debt situation will require you to cut back on your entertainment expenses. Not only that, it will tell you how much you can live on. That is very important because you want to maintain control over your financial life.
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Make plans to lower your debts and increase your savings. By determining the type of lifestyle you will live, you can now come up with a plan to pay off what you owe and increase your savings. Since you have yet to get a job, you want to cut back on your expenses. For a lot of people, can could mean moving back in with their parents. According to a poll done and published by Gallup.com, 14% of those between the age of 24-34 are living with their parents. Although they have graduated, these people chose to share living expenses with their parents to keep costs down. While you are doing that, you want to draft a payment plan that will help you pay off your debt once you get a job.
Remember that while you are taking care of these tasks, you should be looking for a job in preparation for the payments you will make on your student loans. Most of the money tips for new graduates are usually focused on paying off this debt. You only have 6 months from the time of your graduation before the first student loan bill comes in.
5 important money acts when you get a job
Once you get a job, there are 5 more financial jobs that you need to accomplish. The first five are mostly in preparation from your student loans. This time, you will add more tasks that will help prepare for your financial security. You will not only manage your debt in your 20s, you also have to make sure that you set up your finances right so you can maximize the potential of your money to grow.
Here are the 5 money tips for new graduates who just got accepted for a job.
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Implement your plans to pay down your debts. The first thing you will make sure of is that your debt payment plan will be implemented strictly. You want to avoid the late penalty charges and the other costs that irresponsible payment behavior will bring.
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Divert money into your emergency fund. Once your debt payments are secure, you should look into your emergency fund next. Take note that you have to do this simultaneously with your debt payments. Some financial experts will even encourage you to prioritize this. But given the danger in defaulting on student loans, we will advise against it. Pay the debt and put aside any amount for your savings. Any amount will do. Even if it is a small amount, that will accumulate to be a big amount in the end.
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Plan for retirement. As early as now, you want to determine how much you will need to retire and start saving up for it. Most employers will offer a 401(k) plan. Some of them will even match your contributions. Take advantage of this so you can grow your money as early as now. If you start in your 20s, you can contribute a small amount and still get enough when you retire.
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Seek out investments you can make. You can start investing in stocks and bonds as early as now so you can diversify your sources of income. You can start small and whatever profit your initial investment makes, put it back in. That will help increase the growth of the money you invested.
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Create a list of financial goals and when you want to reach them. Lastly, you want to come up with a list of financial goals that you want to reach throughout your lifetime. It does not have to happen all at the same time. For instance, you can start with a car so you have the means to go around. Save up for it and buy one in cash. Then you can start saving up for the down payment of your home. Try to put a timeline so you know your deadline.
We are going to say that you should look into insurances too but this really depends on the lifestyle that you want to lead. You may or may not opt to get an insurance. In some cases, employers offer this for free so you may not need to get one on your own.
All of the money tips for new graduates are meant to help them set up their finances right so they can have a financial security. This is something that you have to work on as early as possible. The earlier you start, the earlier you can reach your dream lifestyle.