Whether you just recently graduated from college or you’re close to graduating, you’re about to start a new part of your life. You’ll have to find your first “real” job, learn to effectively manage your money, and grasp all the ins and outs of adulthood.
It’s really a lot less scary than you would think. Below are five finance tips for new college graduates entering the real world:
Wait to Spend Your Paycheck Until After You Receive It
A mistake many new graduates make is that they spend their paychecks too soon. A person who finds their first real job may estimate what they think they earn based on the salary they are bringing in annually, only to find out that their actual paycheck is much lower. This can be a bad situation if you have already spent your paycheck on items such as a new car, an upgraded apartment or new clothing.
Your paycheck may be much lower than what you originally anticipated because of the many expenses that may be directly taken out of your paycheck. These include federal and state income taxes, social security taxes, health insurance premiums, and more. To get a better idea of what your first paycheck will look like, check out our salary calculator.
Make a Plan to Pay Off Your Student Loans
According to the Wall Street Journal, the average student loan debt for the Class of 2014 is approximately $33,000. If you have student loan debt, then you should think about creating a plan to pay off your student loans.
Once your student loan payments become due, you might find yourself straddled with a $1,000 or higher monthly student loan payment. This can add a lot of stress to a person’s life, so making a plan to get rid of your student loans can free up more money for the things you truly want in life
Start Saving for Retirement
Yes, you‘re young, but that doesn’t mean that you shouldn’t be looking ahead to retirement. Now is the perfect time to start because you can get used to saving money early in your life. By saving early, you have the wonderful opportunity to make your investment grow thanks to a little thing called compound interest.
Many employers also offer some sort of retirement plan. As a new college graduate, you should explore the option if it’s presented. Some employers will even match the amount you save for retirement, so you may be turning down free money if you don’t sign up!
Create a Budget
A budget will help you save for the things you really want, such as a fun vacation, and it will also help you make sure your spending is in check so you don’t take on any unnecessary debt.
When you first graduate from college, it can be very easy to succumb to lifestyle inflation. This is when you start spending more money because you are making more money. However, this can also lead to disaster if you don’t know when to stop. It’s easy to fall into a trap where eventually, your spending may be higher than what you can actually afford. However, creating an effective budget can help you stick to your spending and savings goals.
Start an Emergency Fund
Before, you may have never needed an emergency fund. However, once you enter the real world, you definitely will.
An emergency fund is a special savings fund where you save money just in case something unexpected takes place. Depending on your situation, you might create an emergency fund just in case you get fired or laid off, a house repair is needed, your car is having issues, a medical issue comes up or something else.
An emergency fund can help make an unexpected expense much more manageable and less stressful because you’re able to handle the problem with the money you have already set aside instead of taking on debt.
What finance tips do you think new college graduates should be aware of?