Dear College Graduate: Keep These 4 Tips in Mind
Graduating college is a huge accomplishment. But any major life change can lead to questions and uncertainty. That’s especially true when figuring out your post-college finances. After all, you may live in a new environment, and there are decisions to be made if you want to set up yourself for success.
To help you start, here are four key tips to keep in mind.
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No. 1: Create a post-grad budget
Transitioning from being in school to working can be rocky, especially if you don’t have a financial plan to help you understand where your money should be going.
You’ll want to note a few key things:
- When you expect paychecks to hit your bank account
- When your various bills are due
- The amount you need to earn to cover all necessary expenses
- How much of your income is “disposable” for fun activities or items rather than necessities
If you have student loans, you should note when your loan grace periods end (usually six months after you leave school, but it can vary — especially for private loans). That way, you’ll be able to make your first payments on time and avoid damaging your credit.
No. 2: Focus on building credit
“There are few things in life that are more expensive than crummy credit, so the sooner you can start building yours, the better,” Schulz says. After all, the cost of anything from credit cards and loans to whether you qualify for an apartment can depend on having a good credit score.
For context, here are the factors that contribute to your credit score:
- Payment history
- Amounts owed
- Length of credit history
- Mix of debt types
- New credit inquiries
The good news is that you have options to start building credit, even if you don’t have an established history from student loans.
He adds that if your parents have great credit, being added to one of their credit cards as an authorized user could help you build credit. But keep in mind that there can be downsides to this method.
“Be sure to have some frank conversations about the expectations around using the card and the consequences of not living up to those expectations,” Schulz cautions. “That’s because the authorized user has no legal liability to pay back what they spend. All that responsibility falls on the primary account holder.”
No. 3: Leverage financial management tech
From managing your credit cards and bills to tracking spending and saving, your financial life is often scattered across several lenders, companies and banks, so it can be hard to keep track of everything. That’s why using a budgeting or financial tracking app that pulls all those financial obligations into one place can be extremely useful.
But that’s not the only way technology can be your financial friend. For example, if you’re willing, taking advantage of autopay for your finances is also a great way to avoid late payments (and associated fees). Otherwise, you may be able to opt for text message alerts or emails for your payment due dates if you prefer a more hands-on approach.
“You can know when someone is spending on one of your cards without your permission,” Schulz says. “You can get credit monitoring to track any unusual changes to your credit. There are so many examples of how technology can help you manage your finances. They’re not foolproof because no technology is, but they can help you stack the odds in your favor.”
No. 4: Figure out your financial priorities
One of the most common questions after graduation is what to prioritize: Debt or savings? After all, the full balance of your student loans may feel like something you want to get rid of ASAP, even if that means skipping an emergency fund for a bit. But that usually isn’t the right call for long-term financial health.
In other words, it can make sense to tackle both of those goals (paying off debt, including student loans, and saving money) at the same time, even if that means going a bit slower than you’d prefer.
“Once you pay off that debt, the savings you’ve accumulated will keep you from having to go back into debt the next time you have to take the dog to the vet or replace a flat tire,” Schulz says. “With many high-yield savings accounts returning 4% or higher today, it becomes even more important because the opportunity to grow your savings is higher than it has been in years.”