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You've just graduated, and now you're facing something you didn’t learn: how to manage your finances. This article will go over 20 financial tips for new college graduates to start good financial habits.
Tip #1: Make a Solid Budget
The first step to sound financial management is creating and sticking to a budget. I know the word budget is a four-letter word to some. I like to call it a spending plan.
Having a plan for personal finance is the first step to paying off your student loans and balancing your living expenses. Welcome to adult life.
You don’t need to reinvent the wheel when creating your first budget post-graduation.
Use my free budget template for recent college grads, and you’ll be a financial planner in no time (maybe).
Related Reading: Top 5 Budgeting Methods
Tip #2: Keep an Eye on Your Debts
Here is a list of everyday debt payments you may have:
- Student loans
- Car loan
- Credit card debt
- Personal loan repayment
Write all your debts that have a remaining balance and their interest rate. You want to have your eyes opened and aware of all your debt so you can see where you can make positive progress.
The biggest mistake many college graduates make is not doing any financial planning.
Financial planning is everything.
Tip #3: Don't Ignore Your Student Loans
Student debt is not the first thing you think about after college graduation.
Recent college graduates should apply for an income-driven repayment plan. Talk to your student loan servicer to lower your student loan payments.
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You will be saving a lot of money doing this until you have better career opportunities and a higher income.
Tip #4: Clarify Your Goals
As a college student, you had goals about your major, GPA, and graduation goals. Now it’s time to start thinking about what you want for your personal finance future.
Do you want to have a certain amount of money saved up? How much? Start saving now.
Do you want a rainy day fund or start saving for retirement? Start preparing today.
You have the world ahead of you financially. Best to become financially competent ASAP.
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Tip #5: Find Ways to Have Fun Without Spending Money
There are many ways to have fun for free. Whether you spend money or not is optional. Especially as new graduates, you can still get away with using your student ID for many things. Let’s just say I have been a recent college graduate for about six years now. Please don’t tell anyone.
Recommended Reading: 50+ Frugal Things To Do When Bored
Tip #6: Find Good Health Insurance Coverage
You probably qualify for subsidized health care coverage through your state. You want to make sure to check out this page to find out information about your state.
Tip #7: Get a Head Start With Your Retirement Savings Plan
Ask your current job if they have an employer-sponsored plan. If your job has a plan, it’s probably a 401(k). Familiarize yourself with the different types of retirement accounts and which is best for you.
A 401(k) is a good option for many young adults.
Recommended Reading: ETF vs Mutual Fund: What's the Difference?
Tip #8: Consider Student Loan Consolidation
You may consider consolidating your private student loans into one loan. At that point, you will only have to make one payment monthly.
Tip #9: Build an Emergency Fund
Make sure that your emergency (rainy day) fund has 3-6 months' worth of income so that if something happens, you can support yourself. You can accomplish this by saving money every month.
An emergency savings account will save you when something terrible happens. Many choose to save a certain percentage of their income. Start with 10% and bump it up every month until your unexpected expense fund is complete.
Tip #10: Pay Yourself First
One of the best ways to make sure you're always on top of your finances is to pay yourself first.
Set aside a minimum of 10% of your monthly income for yourself, and don’t touch it.
Having some cash set aside will give you the option to jump on opportunities as they come up.
Tip #11: Start Investing Now
What are mutual funds? What’s the purpose of a money market account? How about which retirement plan is best?
There is much they didn’t teach you in school about money.
You must take the initiative to understand the financial products and begin saving for retirement. The sooner you start investing, the more money you will have later in life.
How long do you plan to live? That’s a tricky question. No one knows when their time will come.
Better to be overfunded than be forced to work a part-time job when you’re 75.
Tip #12: Consider Moving Back Home
It’s much cooler to be financially competent and in a good place when you’re 28 after living at home for a few years. Living alone in your early 20s may seem like a dream.
If you are overextending yourself financially, you may have to move back home when you’re 28.
Better to humble yourself instead of living an unsustainable lifestyle.
Tip #13: Don't Be Picky About Jobs
As you interview, keep your mind open to different types of companies. When considering a job offer, make sure you negotiate your salary.
Tip #14: Live Below Your Means
Being frugal does not mean you are cheap. It means you are smart. If you are making $50,000 per year, live like you are making $40,000.
Almost all millionaires you encounter throughout your life will not have a Gucci belt and drive a ten-year-old car. They’re undercover, and that’s how they accumulated $1 million.
Tip #15: Avoid Buying a New Vehicle
If you can avoid buying a vehicle at all, do it. A car is a complete suck on finances. It’s not only the car payments. You will be responsible for the down payment, insurance, maintenance, registration, and other fees.
If a vehicle is a necessity, make sure the interest rates of the loans you’re seeking are well below inflation.
Of course, buy a used vehicle as new cars depreciate quickly, and the new car smell fades in no time.
Tip #16: Start a Side Hustle
Millionaires have an average of 7 streams of income. If you are only relying on your 9-5 income, you are setting yourself up for failure.
Develop your skills into a side hustle and make money outside of your regular job.
You will make more money with most side hustles than your typical job.
Recommended: 50 Best Side Hustles to Make More Money
Tip #17: Educate Yourself on Personal Finance
The only way to have a good credit score is by being educated. You finished college, and that’s an outstanding achievement. Educate yourself, and you will save money throughout your life.
I have found it’s best to have only a few influences regarding financial planning/learning.
Find a few writers/YouTubers/podcasts you like and study them. You can be a financial expert with enough education.
Tip #18: Use Your Credit Card as a Tool
Most people should not have a credit card. The temptation to be a consumer is powerful for many. If you have a problem with discipline, stick to a cash-only system of spending money.
For those who are disciplined, only use a credit card when it benefits you, not the credit card companies.
Again, do everything you can to stay out of credit card debt because the interest rate on this debt is notoriously high.
Tip #19: Work on Your Credit Score
Your credit score determines many things for your future. Having a lower interest rate is vital to improving your personal finance life.
Improve your credit history by staying current with your monthly payments and making sound financial decisions.
Tip #20: Avoid Debt (Usually)
Simply put, if your debt is not making you money, it’s bad debt. Borrowing money to grow a business, good idea. Credit card debt, bad idea. Mortgage a rental property someone else is living in and paying you rent is a good idea.
Stay away from debt that takes money away from you. That’s a liability.
As a certified credit counselor and syndicated writer at MaxMyMoney, Max has coached over 250 Millennials to help take the stress out of money. When Max is not coaching, you'll find him reading financial books, indoor cycling, or visiting local pawn shops looking for swiss-made watches.