Six Ways That Grads Can Better Manage Their Finances
Congratulations—you’re a graduate! It should fill you with pride knowing the four years (or even more) of dedicating yourself to your education has paid off. It’s an exciting time to be able to get your start as a young professional, gain experience, grow your skill-set, and live your best life.
However, if you’re feeling the pressure to start your post-grad life, it’s understandable. You may be thinking to yourself: how do I live the life after college I’ve always envisioned? In order to live comfortably, it’s important that you’re able to effectively manage your finances.
Don't worry! If you’ve made it through college, you’re capable of this too. Plus, there are plenty of resources around to help you be successful. Take time to get a solid game plan in place to better take control of your financial well-being.
To kick start the process, consider the following six tips below to help you crush managing your finances as a grad.
1. Look Into Financial Literacy Resources
It can be very beneficial to keep up on trends and best practices in order to improve your financial health, and it doesn't have to be dry or boring like looking at a textbook or listening to a lecture. You can easily find time for financial literacy; one way you can start is by simply watching quick, engaging videos on a regular basis. There are plenty of fun ways to get valuable pointers on how to better understand personal finance. You can subscribe to some Youtubers, or start a conversation with a financial influencer online to share experiences and ask for actionable advice.
In addition, you can look into resources, through your college or university or even a local library to gain valuable pointers on how to better understand personal finance and how to apply these practices to your day to day. Even these simple tricks and changes to your current habits can make all the difference in helping you get your footing as a recent graduate.
2. Create a Budget and Stick to It
Make sure that you develop a budget for yourself—and stick to it! As a student, you may not have been thinking about the importance of budgeting, but creating and balancing a budget is an important life skill. Start by determining how you can break your paycheck down month to month to help you to balance reasonable spending and saving. Based on your salary, first look at what your obligations are. Most likely, you will be managing to pay back money you borrowed for financial education, along with covering living expenses, establishing savings, and leaving money for leisure too.
You should then track your other expenses and take a look at where your money is currently going. Not to mention, there are plenty of awesome tools that you can download right to your smartphone or use on your computer. You can create your budget by using a spreadsheet or a budgeting app. There are many handy budget templates out there that you can use to get started, and over time, you may even learn that there are some places where you can cut back on your spending. Either way, once you have created your budget, make sure you don’t stray from it!
3. Work on Paying Back Your Education Expenses
When starting out your career, it is important that you create a plan to pay back your education expenses. We get it, paying back your education expenses can be overwhelming, and it’s probably not the first place you want to be spending your money.
However, there are many reasonable options for you to help ease some of the stress when tackling paying back your borrowed funds. If you happen to use an income share agreement to finance some of your education, then you have the flexibility and advantage of payments that are tied to your income. You can determine what your monthly payment will look like, and you can make it affordable in relation to your salary and other expenses. Paying back education expenses shouldn’t be overwhelming—just hold yourself accountable to making your payments on time and manage them in relation to your living costs.
4. Be Careful With Your Credit Card
Having a credit card and using it responsibly is an excellent way to build credit—emphasis on responsibly. A high credit score can help demonstrate to lenders your ability to take out loans and get approved for major purchases. It can also be helpful because you can often obtain rewards funds with each transaction you make. Rewards are money back in your pocket that you can use to treat yourself without having to dip into your paycheck.
However, be cautious about how you're using your credit card. Relying on your credit card too much for major purchases can be a slippery slope. You can easily become out of touch with how much you're spending when all you have to do is swipe. This can especially be the case with all of the digital shopping methods that are available with the click of a button. Therefore, make sure that you’re monitoring your credit and spending habits to prevent any chance of acquiring credit card debt. Be mindful of how often you’re using your card, and opt for cash at times if that helps you be more cautious and prevent overspending.
5. Weigh the Costs of Renting Versus Buying a Home
Cost of living always proves to be a big expense for recent grads—especially if you’re moving out and living on your own for the first time! Both rent and home prices are on the rise, and it can be a big piece of where your money is going month after month. Both renting and buying have their pros and cons.
With renting, you have greater flexibility, the freedom to move more easily, and it can be a less intimidating process. However, the money you spend on monthly rent costs is spent once you send in your check each month.
On the other hand, buying a home can serve as a long-term investment, and your monthly payment can help you build equity. However, it can be a big decision to settle down when you’re still in a discovery phase. When weighing your options, educating yourself on the mortgage pre-approval process can help you determine what your spending would look like as a homeowner. This process can help you determine what your monthly home payment might be, so you can easily compare and contrast to rent prices. This way, you can better determine if buying or renting would be better for your budget.
6. Create an Emergency Fund
Establishing an emergency fund is an important responsibility. Saving for unexpected expenses can protect you in the future. You never know when you may need to tap into an emergency fund; it could be a car repair bill or could help you should your employment situation change down the line. Setting aside a small amount from each of your paychecks can help keep you afloat if need be.
Remember: don't be complacent! Nothing is guaranteed, so by making an emergency fund you can be prepared to face uncertain or challenging times.
Embracing financial literacy will bring you one step closer to mastering money management. As a recent grad, it can be hard to know where to begin. However, if you strive to learn and apply best practices to your daily financial habits, you can prevent yourself from overspending and will instead be on a fast track to securing a solid financial foundation!