Many college students search through the couch cushions for spare change on laundry day, live off their meal plan and have a beer budget but not much else in the way of financial planning. When they graduate, they leave the stage, diploma in hand, suddenly thrust into the “real world.” Their lack of financial experience and knowledge can be a huge detriment, but these tips will get new grads started on the right foot.
Read Up on Money Matters
If you thought homework was over, think again. Find a reading assignment that will explain basic money matters in a way that won’t put you to sleep. Try Kimberly Palmer’s “Generation Earn” or Beth Kobliner’s “Get a Financial Life.” Both will give you the fundamental knowledge you need to manage your finances throughout your twenties and beyond.
Create a Budget
Map out your budget to make sure you are living within your means and won’t end up in debt. Start by adding up the essentials, such as transportation, utilities, rent, groceries and student loan payments. Divide what is left of your paycheck into saving and spending.
Stay Out of Debt
If you are like millions of college grads today, you are likely saddled with student loan debt. Don’t add to the burden by accumulating credit card debt.
Reduce Your Debt Burden
Force yourself to penny pinch to add a bit extra to your monthly student loan repayments. Doing so will save you interest and shorten the life of your student loan.
It may seem too soon to start investing, but it is not. Buying mutual funds or stocks is historically one of the best ways to grow your finances. Check out free guides to learn about mutual funds, bonds and stocks, or sign up for a class with the American Association of Individual Investors.
Start an Emergency Fund
Make this an absolute priority. Aim to save enough money to get by for three to six months without working. Save your “rainy day fund” in a bank savings account or a money market mutual fund.
Understand Your Employee Benefits
If you have already snagged a new job, carefully read the employee manual that probably came with it. Take time to understand your new benefits, and take full advantage of them. It is part of your salary and compensation package, but you have to understand your benefits in order to fully use them.