Graduating from college is a bittersweet experience for many students. Although they’ve acquired a degree in their field of choice, graduation ultimately solidifies their adulthood. There’s no more living in dorms or student housing. Say goodbye to meal vouchers and free or affordable laundry services. The time has come for you to determine your life goals and how you’re going to sustain a decent living.
Whether you’ve moved back with your parents, secured a job and an apartment, or have no idea what your next steps are, take this time to get your finances in order. Though money isn’t everything, it’s intertwined in everything you want to accomplish and acquire as a young adult. By evaluating and preparing in advance, you ensure that this life transition is easier to manage. Continue reading for advice.
Calculate Your Debt (And Develop A Repayment Plan)
Like most American college students, you’ve probably accumulated quite a bit of debt. Whether you charged things on credit cards or primarily relied on student loans, this money must be repaid. Although it might seem tempting to keep making minimum payments on credit cards or deferring your student loans, these methods only increase your debt in the long run. It is best to devise a plan to repay your debts.
After accounting for your everyday expenses, determine how much you have to contribute to your debts. If your student loans were government-funded, you might be eligible for affordable repayment options, including income-based arrangements, so it doesn’t overwhelm you financially.
Create a Budget or Savings Goal
If you plan on moving into your own place after graduating college, you’ll want to have a monthly budget. This budget should include everything from your rent and utilities to your groceries and entertainment costs. A good rule of thumb is the 50/30/20 method. That’s when you spend no more than half your income on necessities like housing and food, thirty percent on entertainment, and twenty percent on savings.
If you’ve moved in with your parents, you may only have to pay for things like your smartphone and transportation. While this may not require you to have a budget, you want to start setting savings goals. If you plan on moving into an apartment, start putting money in an account for a security deposit, first month’s rent, and household essentials like furniture, bedding, linens, etc.
Look Towards The Future
Don’t get so caught up in the present that you don’t consider your future. Although it might be hard to wrap your head around things like retirement, healthcare, or even starting a family as a recent college graduate, it will be here before you know it. Here are a few ways to start securing your future.
- Life Insurance – The hope is that you have your entire life ahead of you, but you cannot predict the future. Part of securing your future as a young adult means ensuring that you take care of any financial obligations related to your passing. While you may not have children at the moment, a life insurance policy enables your parents to pay for final expenses and any outstanding debts. Now is the time to learn more about term vs whole life insurance so you can choose a policy.
- Saving – From saving for homeownership to having a rainy day fund, saving should be a priority after graduating college. Set aside at least 20 percent of your income towards things that you want in the future. This eliminates the need to go into debt to acquire something you want or need.
- Investing – The harder your money works, the less you have to work to earn a decent living. Imagine putting $50 a month in the stock market today only to have it turn into millions of dollars by the time you’re in your mid-30s or 40s? You could retire early, invest in businesses, travel the world, and provide for your family without the stress. Start looking into lucrative investment opportunities now for a big payout down the road.
After celebrating your accomplishments as a college graduate, it’s time to get serious about the next stages in your life. Simply use the suggestions above to begin preparing yourself financially for adulthood and the real world.