Graduation is an exhilarating time – and a frightening one. So much lies ahead after graduation, and it can be a little overwhelming to think about all of the choices ahead of you.
Some of the most important decisions you’ll be making as a new graduate involve your personal finances. What you do — and what you don’t do — in this area can affect your quality of life for years to come.
Despite all of the knowledge you just absorbed in college, odds are good you still have more to learn when it comes to managing your own money. Now that you’re getting ready to enter the workforce, now is a good time to educate yourself in this area.
Not sure where to start? Here’s a list of five things new college graduates should keep in mind when it comes to their financial well-being.
1. Focus on yourself – not on your friends. The amount of money you spend isn’t a sign of success, and it certainly has nothing to do with your value as a person. Don’t try to keep up with your friends’ cars, apartments, vacations, clothing or anything else. Instead, base your spending decisions on the amount of money you bring in and what you need to cover your essential expenses.
And, speaking of spending decisions . . .
2. Establish a budget. The best way to figure out how much you’re bringing in and what your monthly expenses are is by making a budget. There are plenty of apps and software programs available to help you. One free option, Mint.com by Intuit, helps you see where your money goes each month and actually warns you when you’re overspending.
For a few more easy budgeting ideas, check out this blog post. Or this one.
3. Take a balanced approach to debt. If you take on too much debt too fast, you’ll find yourself spending much more than you want on monthly credit card payments. This kind of debt can leave you living paycheck to paycheck, with little to nothing left for savings and emergencies, let alone fun.
Of course, this doesn’t mean that you shouldn’t have a credit card at all: Used responsibly, credit cards can help you establish the credit history you’ll need down the road if you want a mortgage or car loan. If you opt to get a credit card, research the choices out there carefully and be mindful of fees and interest rates. The best way to build a solid credit card history is to never carry a balance: Use your credit card for a few small purchases each month and then pay it off in full.
Another key to building good credit? Make sure you repay your student loans. If you have trouble making your payments, talk to your lender and work out a payment plan. Whatever you do, though, don’t ignore your outstanding loans – or you may have credit problems down the road.
4. Start saving now. Your first savings priority should be creating an emergency fund for unexpected expenses. You’ll need at least three months’ worth of funds set aside for whatever those emergencies might be, from a nasty dentist bill to job loss.
Once you have your emergency fund in place, start working on your retirement savings. It may seem a little early to plan for retirement – after all, you’re still trying to wrap your mind around the idea of leaving college and starting a career. But generating the money you’ll need to live comfortably when that career comes to an end takes time. Start a savings account and set aside a small amount of money each month. And, if your employer offers a retirement plan, grab that opportunity and start contributing to it.
5. Don’t be afraid to negotiate for a higher salary. For inexperienced employees, the idea of asking for more money sounds unnerving to say the least — but most employers expect you to negotiate. By expressing gratitude and enthusiasm for a job offer, and requesting the amount you believe your skills warrant, you’re demonstrating business savvy.
Not sure how much you should make? Do some research online, or talk to people who have some experience in this area. And before you have the real conversation, find a friend and ask them to help you rehearse the back-and-forth discussion that comes with this process. It’s worth the effort.
So, there you have it. Five tips for starting your post-graduation financial life. I’ll leave you with a final word of advice: Don’t stop here when it comes to learning about money. There’s always more to learn, and lots of great sources of information out there. Read about finance and talk to people with knowledge and experience in this area. Ask them which decisions helped them most and which decisions they regret.
You’re in an excellent position to set yourself up for success. Don’t miss this opportunity! Congratulations and good luck!