Graduating from college brings a lot of emotions and to-dos on the table but dealing with personal finance might not be one of them. Although student loans is a major concern for a majority of graduates, there are still a lot of students that believes in college education despite college loans. But these young graduates cannot deny the fact that finances will play a crucial role in their lives in the years to come.
Gone are the days when you have to study up all night for an exam tomorrow or that you are worried on what grades you will be getting after school. You also no longer have to take out and fill-up the FAFSA form to qualify for federal support the coming year because you are already a graduate and should be worrying about earning a living.
The Naceweb.org shares that they are projecting about 1.8 million students graduated this 2015 and that is a big number of people who will start looking for jobs or putting up businesses of their own to be able to make a living. But in light of all these plans, personal finance remains to be something most graduates might not fully understand let alone commit to.
The primary focus of recent college graduates would be to look for a job to earn money to pay for bills and debts particularly their student loans. But managing their finances is more than just making sure their debts are paid off. It is a combination of a lot things and before you get intimidated and go back to school for graduate studies, it might not be as hard as it looks.
Handling your finances after graduation
There are a few things that you need to remember and they may not be as hard as they look but they are not a walk in the park either. Here are some tips that you might want to consider so you can take a proactive approach in dealing with your personal finance.
- Gather all pertinent paperwork. Your parents might have been doing this for you for the past few years but after you graduate from college, you need to be able to do this on your own. When you start looking for a job, you would need school papers to prove that you have graduated and that you really hold that grades and degree you have written down on your resume. You would need these as well in obtaining valid identification when you start exploring your financial options in the future.
- Manage your student loans. Student loans forms only a part of your financial priorities when you graduate but there is no doubt that it is one of the biggest challenges that you have to hurdle. Managing your student loans means so much more than just repaying them month in and month out. The idea is to list down all your loans and explore your repayment options. There are multiple repayment plans specifically for federal student loans as shared by ED.gov.
- Put together a household budget. One of the pillars of personal finance is putting together your household budget ideally laid out a month at a time. You need to remember that the budget is more than just dealing with debt payments because it should also direct your efforts in making sure that you have enough to help you prepare for your future financial goals. You need to list down all your sources of funds which should be particularly easy in the beginning because it will only be from your first job. You then list down all those recurring expenses and debt payments to see how much of all your expenses is taking up your income. You then look at how you can either increase your income, cut down your expenses or both to manage your budget.
- Open an account. It would be challenging to manage your finances without a bank account. Together with those documents and IDs that you have gathered, you need to open either a savings or a checking account to help you monitor your funds and even help keep your money safe. You need to shop around and look at how competitive each institution is in contrast to your needs. Look at their interest rates and how their investment portfolios has performed in the last few years if they.
- Consider getting a credit card. If you do not have one yet, getting a credit card is a great tool that can help you improve your finances. But you need to be very careful because just as it can help you with your budget, it can also be your downfall and your ticket into debt. Use credit cards responsibly and you will see how your credit score can improve.
- Start saving for reserve fund. You will never know what will financial emergencies will happen in the future and the only thing you can do is prepare for it with your reserve funds. This covers your emergency and rainy day fund to help you soften the blow of emergencies as they come. You need to prepare for eventualities such as losing your job, getting into medical debt or even as simple as an unexpected oil change on your car.
- Think about retirement. Thinking about retirement early on in your life help you put everything into focus and guides your actions today. If you have a plan of retiring and travelling at the age of 45, then you need do the numbers and find out how much you need in retirement and align your savings and funds accordingly t reach that goal at that age.
Looking at an early retirement
When you choose to have an early retirement, know that you are not alone in this desire to get out of the rat race early in life. But this is a challenging goal and one that will put your personal finance skill to the test. Here are some tips that can help you along the way.
- Consider taking on a frugal living. There is a fine line between being cheap and being frugal and you need to make sure that you keep your frugality in check. Living below budget can do wonders for your budget especially if there was an increase in your income. Keeping your spending under your budget can help increase those savings for retirement.
- Stay away from trends in expenses. If all your friends are starting to buy bigger homes or trade in their cars for newer models, you need to look at what you need and not what other people are doing. If your car is still running and in good condition, you do not need to buy a new one because your friends have one. Keep your eye on the prize.
- Save as if you won’t have a job tomorrow. BLS.gov shared that the unemployment rate as of April 2015 is at 5.4%. If you want encouragement to save, try thinking that you might lose your job in the next few days and that you need to save as much as you can. Of course this might stress you out so try doing it only when you are at a decision how much you need to put into your retirement every month.
- Stay away from debt. You need to accept the fact that you will make mistakes along the way and might get into debt every now and then. The important thing is that you learn from those mistakes and use those lessons to be able to stay away from debt.
Getting a good grip on personal finance after college can be challenging but not totally impossible. You just need to have a plan and follow through on it to help you reach your goal.