In another couple of months, universities and colleges will be turning out another fine graduating class. It’s been well over a decade since I left the halls of higher education. I would say that I’ve had my share of successes, but I certainly could be tons more successful if I’d followed these six tips for college graduates.
Start Your Budget Right Now
Assuming you have a job and are not moving back in with Mom and Dad, start tracking your monthly expenses vs income. It’s the only way to know what you can afford and what you might be wasting money on. You’ve graduated. There is no need to be cool anymore. Get out the spreadsheets.
Get Student Loans in Perspective
If you have student loans, you’ll have a six month grace period before you have to start paying them back. Determine how that monthly payment fits into your budget, and start setting it aside now. If you get used to spending it, it will seem like a sacrifice when it actually kicks in. Better yet, there is no law that says you can’t go ahead and start making student loan payments.
Think really long and hard before you consolidate into a longer term loan. I consolidated because my interest rate started to rise. I assumed I would still make the same payment and have the loans paid off in 10 years or less. I did not do that, and still have student loans until this day. My husband is a teacher at a Title I school. Some of his loans could have been forgiven if he hadn’t consolidated. Look at your profession and see if there are any breaks or forgiveness programs before you do anything else.
Save Up Some Money
Your new paycheck is not to be spent buying drinks for the entire bar. While that might make you cool if you still need that gratification, it makes you much cooler to have money in the bank. You never know what might happen, and if you have no savings, that’s when credit cards become dangerous.
Also, you may want to buy a house. While there are first time homebuyer programs that let you buy with a small down payment, you still need a stash to deal with home repairs or household expenses that you don’t have as a renter. My advice would be to save up a sizeable down payment and a house repair fund. Interest rates aren’t going anywhere for a while. You will have plenty of time to save up and still find a house if that is your goal.
Start Saving for Retirement
I know you just started working, but trust me on this. The more you can put away in your twenties, the less you will have to catch up later. You are used to being broke, so you aren’t going to miss this money. Take my advice and start putting away 15-20% right from the start. While you may have no problem working more than 40 hours per week now, your priorities will change, and it’s better to have a large nest egg if you want to change career paths down the road.
Get Health Insurance
Yes, you are young and healthy, but accidents happen. The first year into my real job, I had a knee injury that would have been over $10,000 out of pocket if I hadn’t had health insurance. A huge medical bill can certainly derail your plans. If your employer doesn’t offer it, shop around, and consider a Health Savings Account to save on taxes.
Avoid Payments Like the Plague
Obviously, buying a house will likely create a mortgage, and you probably have student loan payments. Don’t take on any more. Here is where you have to put on your blinders and turn on the superhero powers. Everyone is marketing to you. Car dealerships will be running college graduate specials. Furniture stores are offering same as cash for 18 months. Credit card offers will start rolling in. Don’t buy it. Every payment plan you take on eats away a bit of your freedom.
Right now you have the ability to do anything you want, but the more debts you take on, the more you are ensuring that you’ll be living to work. Let your new job bring joy and fund your all of your life’s desires. Believe me, after year 3 or 4 of making payments, you likely can’t remember what you bought or why you though you needed it. Working to make payments is a great way to lose whatever motivated you in the first place. You can believe my advice because I’ve lived through it. Luckily, I am almost on the other side, but some people never get there. Your financial future comes from choices you make right now. It’s much easier to make smart financial decisions from graduation on than try to make up for poor choices later. Choose wisely, graduates!
What advice would you give to yourself as a new college graduate?