Congratulations, you have graduated from college! Next step? Shore up your financial health.
It can seem like you are finally beginning your life, now that you have finished a rigorous schedule of studying and testing. Financial matters might be very far from your thoughts right now. But the truth is that time flies and before you know it you will be facing a myriad of decisions and consequences all influenced by the important financial steps that you take now.
Here are five lifesaving steps that you should undertake immediately upon graduation. These five tasks are key to building a fiscally sound foundation upon which to enjoy a life free of debt and financial stress.
Student loans
Practically no one graduates today without student loan debt. In fact, according to financial aid experts, this year’s graduates will carry, on average, a little more than $35,000 in student loan debt, topping previous years. The first thing to do is examine your student loan package. Is the interest rate favorable or should you re-finance? Can you manage the payments or do you need to restructure? For instance, while the most common repayment plan is fixed payments for 10 years, if you cannot afford it, request to switch to an income-based repayment plan. Most student loan plans give you a six month grace period before you make your first payment. Use this time to save up and organize your finances so you can make that first payment on time. Late or missed payments will negatively impact your credit rating, which is not the way to begin your financial history.
Budget
This is a lifesaving financial task that so many people avoid. A budget is the only way to manage your financial resources and actually it is a very simple task. There are many software packages or online apps that can assist you. Bottom line goal is that your spending does not exceed your income. Calculate all of your income from employment and other sources, then calculate all of your expenses, be sure to include everything. Subtract the expenses from your income, and what you have left over is your monthly disposable income. If your income is not going to cover your expenses, then you need to find a way to reduce some of the expenses or find a way to bring in more income. Do not cover the shortfall with your credit card.
Retirement
I know, you just graduated and retirement looms on a distant horizon, so it can seem like this is something to place on the back burner. Nevertheless, the sooner you begin to save the better off you will be when you reach retirement years. Plus, you may want to retire early. Take advantage of your employer’s 401k plan and contribute the maximum amount. If you can, also open an IRA or Roth IRA and sock away a little bit each month. Gradually, your nest egg will grow.
Emergencies
Life is full of surprises and those unexpected disasters tend to pop up at the most inconvenient times. One day your laptop crashes and you need it for work, or you walk out to start the car and the engine fails. Many people use their credit cards to cover these emergency expenses, but this pattern can lead to overwhelming credit card debt if you are not careful. As soon as you can, set up an emergency account and do not use the funds for any other purpose. Dedicate as much as you can spare each month, and in time, it will quickly grow.
Credit card debt
Credit card debt can keep you in debt for a lifetime if you are not careful. This is primarily due to the high interest rate, which if you do not pay on time, will increase, along with fees, transforming your seemingly manageable charges into an insurmountable mountain of debt. Pay on time and try to make more than the minimum payment. Make a commitment now to first pay off all your current credit card debt and to not incur any new charges unless it is an absolute emergency.
