You did it! With your college, trade school or high school diploma in hand, you’re ready to strike out on your own into the real world.
Whether you have a job in your chosen field lined up or are searching for the right opportunity, now is a great time to take a good look at your post-graduate finances to determine next steps in your new money management journey.
Consider these factors when reviewing your finances and planning for the next several months and beyond.
Develop a Plan
When I speak to students about money management, especially college students upon graduation, I stress the importance of developing a financial plan. Setting short- and long-term financial goals and the steps to achieve them leads to financial confidence that will help develop money management skills throughout their lives. A trusted financial advisor, such as your banker or perhaps your parents’ advisor, can assist with putting the plan together and meeting those financial goals.
Save on Housing Expenses
Each year, millions of graduates move back in with their parents or other family members to keep expenses down while earning entry level wages and salaries.
Even with the job outlook for the Class of 2021 expected to be brighter than 2020, and starting salaries potentially higher too, it’s a good idea to stay with family if you can, or recruit roommates for a shared apartment or rental house, to save where you reasonably can to build a nest egg.
This approach not only keeps your rent down (or free!), but also helps divvy up the utilities and other household expenses, such as a strong Wi-Fi connection, streaming services and food.
Pay Down Other Debts
If you have a Federal student loan, your payments do not begin until six months after graduation. Some private student loans have grace periods too, so check with your lender. Use this grace period to pay down other debts, such as credit cards or a car loan.
If you don’t have any debt, that’s great! Start paying yourself by setting up an automatic transfer to your savings account with each paycheck. If you find yourself having leftover funds in your checking account before each new paycheck, increase the automatic savings amount incrementally until you find a sweet spot.
Then, when your student loan payments kick in, you’ll be in a better financial position to afford the monthly payments.
Consider Loan Consolidations
This is also a great time to talk to your bank about student loan consolidations, potentially combining federal and private student loans into one monthly payment.
If you are a high school graduate preparing for your next step in education in the fall, you can also discuss bank loans that help cover expenses that your federal loans may not cover.
Start Saving for Retirement
It’s never too early to start saving for retirement, even if it is a small amount. If your employer matches retirement contributions, crunch the numbers to see if you can maximize the match by contributing more.
Most companies that provide 401(k)s have a grace period before employees can participate, so the timing of starting your 401(k) may align with when your student loan payments kick in.
Set aside a small percentage of your take-home pay from each check during this time to account for a 401(k) contribution and your expected student loan payment when they start. Combined with your other living and entertainment expenses, this will help you establish a budget.
Plus, you’ll have about six months’ worth of savings to lean on if needed for unexpected expenses later!
Graduating from school and landing your first job is an exciting time. By developing and applying money management skills now, you can build a solid financial future for yourself that could reap rewards for years to come.
Helping you boost your financial intelligence.
Read our financial resources from your friends at WSFS.