This is it. You’re walking across the graduation stage and about to get your diploma for your bachelor’s degree. Congratulations! Now, what next? In your mind, there is a checklist of the things you want to do.
Look for a job. Earn money. Be successful. Be independent.
Some college graduates already have an idea on how to manage their personal finances. But if you’re among those who have no inkling on how to manage your money, here are some things that you ought to do.
- Learn the basics. There are many books and magazines available that aim to help young adults get on their feet when it comes to money management. Listening to finance commentators won’t hurt you, too.
- Master the art of budgeting. One of the golden rules of financial management is to never spend more than you earn. You must also remember that your needs always come before your wants.When making your budget, set aside first what you need for your essentials such as rent, utilities, groceries and the like. After this, you can decide on how much you will give to savings and to your spending. Websites like mint.com and youneedabudget.com that can help you map your budget.
- Don’t splurge. Yes, your wardrobe needs an update. That pair of designer jeans would really good look on you. But ask yourself first, do you really need it? Do you really need to eat dinner in a fancy restaurant every night?Find a store where you can get the stuff you want for a bargain. Secondhand stores sell everything from clothes to books to furniture.While it is okay to treat yourself once in a while, especially, if you’re celebrating a milestone or a special occasion, don’t do so at the expense of being broke. You don’t really want to live from paycheck to paycheck nor do you want credit card companies hounding you day in and out.
- Share a living space. It’s gratifying to be living on your own. But unless you suddenly find yourself owning your own house right after your graduation, chances are you are going to have to rent.You can cut down on rental expenses by sharing an apartment or a house with a friend. You can even pool your resources together so that both of you can save on utility bills, groceries, and other essentials.Or you can just move back in with your parents if they’ll let you stay without paying for the rent. You can save that house rental money for something else.
- Don’t bury yourself in debt. In fact, avoid being in debt, if you can. This may be difficult for some graduates since most of them finished college with thousands of student loans waiting to be paid. A recent Fidelity Investments study found that 70% of the class of 2013 is graduating with an average debt of $35,200.Debts take a big chunk out of your income. So don’t accumulate debt. Pay off your student loans before you avail another one for a car or a house. Finish paying it off as fast as you can. Adding extra money to your monthly repayments can shorten the payment period of loans. It will also save you interest.Being in debt prevents you from pursuing the life you want for yourself. You would always question yourself if you can afford to do what you really love to do. You will look for a job that allows you to earn enough to pay for your monthly obligations even if that isn’t really what you wanted to do.Pay off your debts while you’re still able to. Don’t incur more just because you think you have the capacity to pay it off. A Wells Fargo Retirement report states that 42% of millennials say their debt is “overwhelming.” You don’t want to be old and still be in debt.
- Save for the rainy days. Make it your personal goal to have an emergency fund. You never know when you’re going to need it.Financial advisers would say that your emergency fund should at least be equivalent to three to six months’ worth of living expenses. You can raise the amount higher until you feel secure about it.You may opt to place your emergency fund in money market funds or bank savings account.
- Investments. You’re never too young to start investing. In fact, it is more advantageous for you to do so because you have more time to grow your money unlike people who started out late in their lives.If you have no idea on how and what to do, then learn. There are websites such as smartaboutmoney.org that offers free lessons on the basics of stocks, bonds and mutual funds. There are also available seminars and short courses on investing fundamentals that you can sign up to.
- Have a retirement plan. Most employers have a 401(k) or a similar retirement plan. Take advantage of it.Your contributions are automatically deducted from your paycheck. It becomes tax-deductible and your money grows tax-deferred until you take it out. If your contributions is enough to make a match, your employer puts in an amount resulting to the contributions that you made. Most employers require workers to save between 4 and 6% of pay to get the maximum match.The automatic feature of a 401(k) allows you to save for your retirement without having to think about it. There are penalties for early withdrawals so it will help keep you from prematurely taking the money. Think of it as a long-term investment plan.
- You are not invincible, get a health insurance. When you’re still in your 20’s, you’re too young to get sick. You’re too careful not to harm yourself. But illnesses and accidents know no age. You’ll never see them coming. And medical bills are known to drive a person to debt.Get a health insurance that will help you pay for your medical bills. If you’re under 26 and can’t get insurance through your own job, you can be insured through your parents’ health insurance plan as their dependent as indicated in the Affordable Health Care Act, or more popularly known as the Obamacare. Short-term insurance policies are also available for those who do not have jobs with health insurances or if they’re not qualified to be dependents under Obamacare.
- Indulge yourself on life experiences. Life experiences are as important as financial independence. While money allows you to live comfortably, you can’t take it with you. Enjoy your life and build a lot of memories. Those are priceless.