When you graduate college and start working full-time, you may be making more money than you have been accustomed to while in school. At the same time, living expenses might be more than what you were used to, and trying to balance the two can be challenging. Throwing student debt into the mix makes things even more challenging. There are a few things that every college graduate should know about managing their money.
Track Monthly Expenses
Without a budget, you may be surprised that you don’t know where your money goes. Part way through the month, you may find you have used up your monthly allotment of funds. Spending can add up quickly, but using a budget can give you the freedom to control your own spending. After graduation, student loans can become a top priority because of how high the monthly payments can be. It might feel like they are preventing you from meeting other financial goals. However, one way to mitigate the effect of student loans is to look into a student loan refinance. That’s because it gives you the freedom to pick loan types and get a monthly payment that is more affordable.
Avoid Putting Off Retirement Savings
As soon as you have a job that offers any type of retirement savings, make sure you are automatically contributing a portion of each paycheck to the account, so you meet the employer’s offered match. Some employers do this automatically, but always make sure you read the details to get this set up. It’s a good idea to save at least 10 percent of your income, and more if you can swing it. As your income increases, so should your retirement savings until you are putting in the maximum allowed each year. Remember that your contributions to a 401(k) are usually tax-deductible, so contributing can often put you into a lower tax bracket.
Even if you can’t use a traditional 401(k) plan, you still have the option of a Roth IRA. This is a great option if you start out being self-employed before getting enough experience to land that full-time job. There are some rules around saving in these types of accounts, so make sure that you do your research before signing up for one, so you don’t get penalized. They often have great rates of return, so contributing early can really help you later in life. Putting aside several thousand dollars each year can help your savings grow to over a million dollars once you are ready to retire.
Also Read – 4 Tips for Attending College Later in Life
Create Your Emergency Fund
To increase your financial health and psychology you should have something set aside for emergencies, especially if your family is not able to help you out. It’s usually a good idea to have at least three to six months of living expenses set aside. Still, many people don’t have close to this amount, and it can cause them to have to go into debt to pay an emergency expense. Consider starting with about $1,000 to $2,000 and gradually building up from there.