You’ve put in the long hours, countless cups of coffee, hundreds of assignments, and sleepless nights to earn that degree. Now what?
You want to start you financial life off right, but aren’t quite sure how to? No problem. Here is a list of the best 5 money moves you can make as a college graduate to become financially stable and plan for the future.
Whether you are reading this unemployed on your mom’s couch or working your dream job living on your own, these tips will help you reach your financial goals.
1. You Have To Start Somewhere
You go to college and come out thinking you’ll be able to get the perfect job in your field of study right away. Many people hold out for this job and end up wasting precious time. Remember, it’s not against the rules to look for a new job while you already have one. The key to starting a financially stable life off right is to start accruing income as soon as possible.
This is not to say that you should just take any job though. Try to find one that relates to your field, even if it is lower on the totem pole than you would like to be. CNBC found that “more than 40 percent of college graduates take positions out of school that don’t require a degree,” and “more than 1 in 5 college grads still aren’t working a degree-demanding job a decade after leaving school.”
Finding a job related to your field of study is important for the future, but don’t hold out for one that perfectly matches your ideal job right off the bat. You have to start somewhere and work your way up to what you want.
2. Think About Retirement
But it’s so far away? Yes, but every little bit now contributes to a larger payout later on. Don’t forget that compound interest is your best friend. Adding to your 401k now allows for more money to be accrued, leading to you living your best retirement life.
Don’t forget about the employer’s match! Max it out if you are able, but make sure you aren’t putting so much away that you can’t get by now. It’s all about balance. Somewhere between 10-12% of your salary is perfect for young adults like you.
Not quite sure how a 401k works? Don’t be ashamed, you are just starting out. The 401k help center does a good job of explaining to you how it works and what exactly it is.
If that doesn’t sound like it will work for you, there are other ways to save for retirement. Although a 401k is probably the best way, U.S.News has an article explaining other ways you can save.
3. Open an Emergency Fund
Speaking of putting away money for later, an emergency fund can be very helpful. You’re already saving for retirement, now I’m telling you to put more money away for an emergency? Yes.
You should open a high-yield savings account with an automatic recurring transfer from your checking account. Look at your bills and try to aim to have about 3 months worth of expenses in your account. Of course, this may not be feasible for everyone, so maybe even shoot for just a couple hundred dollars.
Schedule your automatic transfers for payday. You don’t want to be tempted to spend the money elsewhere. If you are having trouble calculating how much money you should set aside each pay period, try using the Emergency Fund Calculator.
4. Establish Credit
Credit can seem scary or even pointless to some, but it is all in how you go about it. If you want to buy a house down the line or even a nice car, you need to start establishing credit now. Having a credit card and using it wisely helps you build your credit history and maintain a healthy credit score.
How do you use a credit card wisely? Easy, treat it as a debit card. Only spend what you can pay. Paying off your credit card monthly in full will prevent you from overspending and getting into credit card debt.
You can even transfer money from your checking into your credit card on a periodic basis to ensure that you don’t overspend.
Still worried about how to wisely use your card? Take a look at Capital One and their tips on how to safely build credit.
5. Pay Attention To Your Student Loans
You know you have them, but do you know about all the repayment terms and options? Take a look at your loans and see what will work best for you.
Did you know you can refinance your student loans? Doing so can save you in interest and therefore, money. It can also help lower monthly payments and help you pay it off faster. Nerdwallet lays out the steps on how to refinance to help you determine if it is right for you.
Did you also know that you can choose your monthly payment plans or even pause them? Seriously taking time to look over your loan and understand how it works can save you thousands of dollars and prevent you from making late payments that will effect your credit score.
Student loans have an impact on your finances for possibly a decade or more. It’s important to pay attention to how you can save money while paying them back.