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There are plenty of college graduates out there who have no idea how to manage their own money. This isn’t necessarily their fault, as up until graduating college, many young adults had their finances looked after by their parents, however, this all changes upon graduating college. College graduates must learn how to be financially savvy and take care of their own finances. Unfortunately, this is easier said than done. Here are some tips on order to get college graduates on the track to financial success by making smart personal finance moves.
Create a Budget
One of the first steps to being financially savvy as a college graduate is to create your own budget. After you have landed your first job and have worked for a couple of months, you should be used to the amount of money you bring home after taxes. This is the perfect time to plan out how much money you are able to spend every month and how much you should put away. Creating a budget is a fantastic way to help you discover whether you’re on the path to spending more money than you can afford to, which is quite easy to do straight out of college.
Live With Your Parents
You may have thought you left the nest egg for good once you went off to college, but there is no shame in returning for a few years before you get your finances in check to keep housing costs down. However, before you consider this option it is best that you discuss it with your parents to see whether or not they would be okay with the idea. By not having to deal with rent straight out of college you can devote that money into chipping away at your student loan debt as well as build up your savings.
Stay Away From Debt
Debt is the killer of all dreams. If you don’t have to deal with mountains of debt payments then you will be better able to pursue your dream career and take any job opportunity that are presented to you. Being strapped down by debt can prevent you from taking on a job that you could fall in love with due to the fact that the salary may not be high enough to sustain you while having to make monthly debt obligations.
Pay Student Loans as Quickly as Possible
In many cases staying away from debt is simply not possible as a college graduate. If you are dealing with large student loans then it can help to think about them in a different way. Don’t consider your student loan debt as a bill you have to pay each month, but an enemy that you have to attack head on. The quicker you pay your student debt the better off you will be. To do this, save as much as possible, and be okay with pinching in your first few years out of college.
Create an Emergency Fund
It is recommended that you put away at least 3 to 6 months of your living expenses into a rainy day fund. This should be one of your top priorities as a college graduate, as one of the worst thing that can happen to you financially is to find yourself in a sticky situation that you cannot afford to be in such as a totaled car or getting fired from your job.
Invest Your Money
It’s never too soon to start investing your money. In fact, one of the biggest advantages that you have over the older generations is that you have much more time ahead of you. This means you have a longer time to allow for your money to grow. The best way to get started is to buy mutual funds and stocks. If you do not know the ins and outs of investing then a good place to start is the Internet. There are many free guides to investing smartly out there such as Smartaboutmoney.org.
Take Advantage of Retirement Plans
Those who are under the age of fifty are able to contribute as much $17,500 to a 401(k) or other retirement plan. These contributions are automatically deducted from your paycheck and are tax deductible. Putting your money into a retirement fund allows it to grow tax-deferred up until you retire.
Don’t Skip Out on Health Insurance
When you’re young it can be easy to forget that you aren’t invincible and that you can in fact get injured or sick in your twenties. In order to soften the blow of expensive medical bills it is crucial that you take health insurance seriously and buy enough coverage to protect your finances in case of a medical emergency. The good news is that under the Health Care act you can stay a dependent under your parent’s health insurance plan until you turn 26.
Don’t Forget to Live
With all these financial tips you may think you have to put your head down and work your way out of your student loans without ever coming up for air, but this isn’t the case. Remember to have fun and live a little while you’re still young.