Top 10 Financial To-Dos for Recent College GradsJuly 19, 2017 Judith Ward, CFP®, Senior Financial Planner
- Set up a budget accounting for all your expenses and make sure you save some money on the side.
- Don’t ignore student loans. Know what your monthly payment will be and make sure you pay it on time.
- Calculate your living expenses and account for more than just the rent. If you are moving back home, establish some guidelines.
- If you have a job, learn about your employer benefits like health insurance and savings plans like 401(k)s.
If you’ve recently graduated from college, congratulations! Welcome to adulthood, the real world, or whatever you want to call it.
I’m sure you want to get busy with work and life, but there are some things you should keep in mind when it comes to your finances—before life gets too complicated.
In the spirit of late-night TV legend David Letterman’s signature top 10 lists (if you don’t know who he is, look him up, some of his lists are classic!), here are my 10 financial tips for college grads to follow:
10. Start earning and keep learning.
For most people, the first priority is to make money. If you don’t have a job lined up already, find one. While it might not be your dream job, it’s important to get on-the-job experience and begin building your resume for the future.
9. Calculate your living expenses.
Leaving the nest? Do your homework! Consider all the potential costs of living on your own or with roommates. It isn’t just about affording the rent. There’s insurance, utilities, food, and other costs to consider based on where you want to live.
8. Before you boomerang back, have a chat.
Moving back home can be both enjoyable and frustrating for you and your parents. It’s best to discuss and negotiate ground rules such as shared expenses, time frame, and responsibilities around the house. You may not be paying rent, but take it from this mom, it helps if you do the dishes and keep your room clean. Your future roommates will appreciate it too.
7. Don’t ignore your student loans.
If you borrowed for college, it’s time to pay the piper. The loans aren’t going to go away. Your first bill will be due in six months. Know your monthly payment and prepare for it. If the amount is high compared to your income, an income-driven repayment plan might work for your federal loans. Also, an emerging trend in company benefits is helping employees with student loan debt, so check with human resources to see if that’s available.
6. Apply for health insurance.
You might be young and healthy, but you still need health coverage. If you’re uninsured, a medical emergency can easily wipe out your savings. Currently, you can stay on your parents’ plan until age 26, but you should also explore what your employer offers.
5. Brush up on benefits.
Take advantage of company benefits, especially a 401(k) plan. Get the company’s matching contribution if there is one and sign up for auto-increase, a service that automatically raises your contribution every year. Aim to save between 10% and 15% of your salary over time. If you don’t have a company plan, saving in a Roth IRA can be extremely beneficial for young people.
4. Pay yourself first.
Have money taken directly out of your paycheck before you get a chance to spend it. Set aside money each pay period in a savings account to build up cash over time. You‘ll want this behavior to become second nature.
3. Check your credit score.
You worked hard on that GPA, but there’s a new number in town that is just as important... your credit score. Know it, monitor it, and improve it! If you lived off of credit cards in college, pay off or at least reduce this high-interest debt before making any big purchases.
2. Bite the bullet and budget.
The secret to financial success is a budget. I know, what a downer. Find that killer app and get started now!
And, my #1 tip for recent college grads:
1. Saving looks good on you.
Just like those hours you spend at the gym, becoming financially fit takes commitment and determination. Keep it simple: Spend less than you make. It sounds easy, but it takes work. And it’s worth it. At every stage of your life, you’ll be glad you did.
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