Your life after college can be challenging especially when it comes to managing money and your personal finances. You may or may have not had financial responsibilities during school. For those who worked their way through school had to learn very early how to earn and manage money to meet expenses. But many graduates were either supported by mom and dad or a scholarship. Of course, the main expenses to manage in college are entertainment, food and perhaps shelter. So, even if you’ve had some experience, you will be faced with new challenges and questions.
Personally, I was far from having a good understanding of personal money management, the importance of savings and avoiding debt right after college. Although I made some financial mistakes, I can share some tips today in the hope you won’t do the same.
10 Tips for Your Financial Life After College
Don’t finance a new car
Most graduates are excited to get a new job and decent salary after all their hard work in school. But many of them look around and see the new cars their friends have just purchased and immediately feel they deserve the same. You don’t unless you can pay cash. You may be driving the car you had in college (if you were lucky to have one) for a while, but avoid financing a new car. Financing a new car will put you in debt for more than $300 per month and you’ll live with that debt anywhere from 4-6 years. It’s not worth it. Rather, begin paying yourself a car payment and save the money until you can buy a good and reliable used car.
Don’t spend more on a credit card than you can pay off each month
Perhaps you already have a credit card, or are thinking of getting one. A credit card can be good to use in certain situations. But, make sure you don’t carry-over a balance at the end of each month. While this may not make much of a difference at first, a hundred dollar balance will eventually turn into several hundred and then a thousand or more. It happens to many people because using a credit card is so easy to do. Only spend when you know you have the money for it.
Get on a plan to get out of debt
Speaking of credit cards, did you have one in college? Chances are you may have some credit card debt and student loans to pay off. Make sure you have a plan to start paying extra to get out debt as soon as possible. Once you’re debt free, you can begin to save more of your income for future purchases such as a car and home.
Live on a budget
Now that you’re earning money, you have to learn to manage money. The best way to do that is by living on a spending plan, or budget each month. Create a budget and track your expenses immediately. Personally, I like using a hybrid of the envelope budgeting system where you pay cash for areas such as entertainment and clothing, but use credit or debit for other areas.
Don’t be too picky about your first job
Hey graduate, did you work hard in school and make good grades? Congratulations if you did, but don’t be too confident and think you deserve everything the professional world has to offer the day after graduation. Rather, focus on getting experience before pay. Chances are your expenses will be minimal after school and you can work for less, but learn a lot about yourself and your future profession. All this being said, don’t jump at the first opportunity out of school either. Make sure the position is the right fit for you as well as the company.
Read the Total Money Makeover by Dave Ramsey
I know there are a lot of good personal finance books out there, but the one I probably enjoyed the most that got me even more motivated to get out of debt was Dave Ramsey’s Total Money Makeover. It’s filled with great practical tips and will help you set your priorities straight.
Set aside a portion to give each month
Money is a powerful thing and we can’t control that power on our own. If you’re a Christian, I recommend giving from your first pay each month to release the financial bondage money can have on you. If you learn to give money first you can truly appreciate money as a resource that only comes from God which is your job to manage.
Rent a modest apartment
Are you starting to understand the theme here in this article? Live modestly and get your finances heading in the right direction before you make a move to a nicer car or buy a home. Try to find a safe, but easily affordable apartment you can call home for the first few years. Earn, give, save and get out of debt in these years and then consider buying a home when it’s affordable and you can make a 20% down payment.
Create a 5 year financial plan
On top of these tips you’ll want to set some goals for yourself. I would advise doing this after you’ve been out of school and working for a few months. Setting a five year financial plan can be encouraging because you have some real goals you can accomplish in a short amount of time. It will also help drive your spending behaviour each month.
Set some money aside in a savings account
As a part of your monthly spending plan you’ll want to carve out at least 5% for savings until you have $1000 put back. Then, stop saving and pay off any credit cards using that 5% plus any extra you can afford to put on them. Once completed, you should build up a full month’s of living expenses in savings and then start tackling other forms of debt. You can get some of the best yields available for your savings by using an online savings account.
Finally, put all these tips together in one big plan by following the Crown Money Map. The Money Map has been a blessing for many and if you start following it in your life right after college you’ll be miles ahead of so many who have traveled these roads before you.
What do you think about these 10 tips for your financial life after college?