Personal Finance Tips for Recent College Grads
Did you just graduate college? Congratulations! While the world is now your oyster, there are certain financial considerations you should make to successfully transition from student to professional.
5 tips for recent grads
Budget! Although it may seem time consuming, it’s crucial for recent grads to routinely make a budget for their spending. Budgeting is more than living within your means, it involves preparing for whatever life brings your way.
Here’s a sample of what might be included in a recent grad’s budget:
- Rental and utilities
- Student loan payments
- Phone bill
- Gas and transportation
Some have found success following what’s called the 50/30/20 rule where you spend:
- 50% on needs like rent, groceries and minimum loan payments
- 30% on splurges like trips, takeout and concert tickets
- 20% on savings and paying off debt
Work towards paying off student loans- Luckily, most student loans have a six month grace period, so your first payment likely won’t be due until late fall. However if you’re in a position to start paying, you’ll save on interest and establish the habit of paying. If monthly payments on a federal loan are too high, you can apply for an income-driven repayment plan that caps payments at 10% to 20% of your income and forgives the remaining balance after 20 or 25 years.
Maintain good credit- Making timely student loan payments will help with this tremendously. Consistent payments reflect positively on your credit, and accessing the best rates on loans, insurance, mortgages, rentals etc. depends on a good credit score (a score in the high 600s or above).
Start saving for retirement- You’ll definitely want to establish a retirement plan sooner rather than later. Your employer might offer a 401(k) match—aim to contribute at least enough to get the full match—it’s essentially free money! If your company does not offer a retirement account, you can open an individual retirement account (IRA) through a financial advisor. A Roth IRA can offer tax benefits to new graduates.
Be careful with credit cards! Don’t open a credit card just because it seems like a good offer (rewards program, low interest rate, etc.) Your credit score takes a hit every time you open a new account, and when you have multiple cards, it can be tempting to use them and drive up your balances. Only charge what you can afford to pay!
Now, life begins! Once you’re earning more and are more established in your career, you’ll be in a better spot to really start preparing for the future.
Need guidance on your individual situation? KLR Wealth Management, LLC can help.
Published on: 05.30.19