Crossing the stage at graduation doesn’t just symbolize the end of a chapter, it marks the beginning of a new one. Learning how to financially support yourself is an important piece of transitioning to post-grad life, but it can feel overwhelming. Here are a few financial tips to consider as you enter this new stage of life.
Set realistic financial goals
Assess the current state of your income and expenses and use that analysis to set realistic financial goals. As a recent college graduate, be mindful and honest with yourself when making decisions for the future.
Start by identifying a long-term goal you have, such as buying a house or paying off student debt, and then brainstorm short-term goals to achieve it. These short-term goals could include building a budget, reducing debt by a certain percentage, or setting aside a specific amount of money each month. Setting realistic goals will better help you track progress over time.
Stick to a budget
A budget is a helpful resource to hold yourself accountable as you become familiar with your spending habits. Whether it’s a phone bill or groceries, start by identifying and recording expenses somewhere easily accessible, such as a spreadsheet. Identifying your regular expenses will make it easier to classify each as a “need” or a “want” in your budget.
While some months may need more flexibility than others, consider applying the general framework of the 50/30/20 rule to your budget:
- 50% of your monthly income should cover needs, such as rent, groceries and insurance. These expenses should take priority over anything else.
- 30% can then be spent on wants, like dining out or streaming service subscriptions. This is discretionary money, and you can spend it as you please.
- 20% should be set aside for savings. Whether it’s a general savings account or a retirement account, this money shouldn’t be touched unless needed for emergencies or once you’ve reached your saving goal.
Don’t forget to account for unexpected expenses. While these are unplanned, having flexibility in your budget will support you when they inevitably come up.
Practice healthy financial habits
Important financial habits to implement after graduation include:
- Pay bills on time – Not only can a missing payment result in a late fee, but it can also have a negative affect on your credit score. Consider setting up automatic payments to ensure bill deadlines don’t get missed.
- Pay off debt – When managing debts, it’s typically smart to pay off more than is required every month, but only if you can afford it. Paying more than the minimum requirement will reduce the principal balance much quicker, and you can save money on the interest charged on your debt.
- Monitor bank statements regularly – No matter the financial stage, always check bank statements as they’re released. Review the transactions to ensure there isn’t anything out of the ordinary. If there are any inaccuracies or instances of fraud on statements, notify your bank right away. The earlier fraud is caught, the better.
- Build a credit score – The easiest way to build a credit score is to pay bills and debts in a timely manner. Credit scores are largely calculated based on your borrowing and repayment history. A credit score above 670 is considered good. Building a good credit score can offer attractive benefits in the future, such as when you start applying for home loans.
Developing these habits early on will result in more financial opportunities in the future.
Research options to build savings
Even though you just graduated college, explore ways to put away money for the future. Here are a few options worth researching:
- General savings accounts – This is the most common way for adults to hold funds for both short-term and long-term goals. Some types of savings accounts provide better opportunities for accumulating interest than others, but all are easily accessible in case you need to pull funds.
- Retirement accounts – It may feel too early to start saving money for retirement, but it’s more important than you think. From a 401(k) to Individual Retirement Accounts (IRAs), there are many options to begin saving. Be sure to understand what retirement benefits your employer offers and get started saving early. A general rule of thumb is the earlier you start saving for retirement, the more financially comfortable you’ll be when you reach your golden years.
Financial independence after graduation can seem daunting, but there are several resources to help you. Seek advice from trusted individuals in your life or speak with a banker to get started on the right foot.
