The transition from college to the “real world” is never easy. But when you add inflation, a tough labor market and the ubiquity of AI, the transition can feel especially tricky.
When the going is tough, the best bet is often to fall back on financial basics. While the larger economic environment may be out of your control, you can at least make sure your financial situation is starting off on the right track. Use these four tips as guidance after graduation.
1. Do not underestimate the importance of a budget
“When it comes to money, it’s best not to wing it,” said Investopedia. To formulate a plan, begin by getting a handle on the full details of your current situation, accounting for what income, savings and debt you have. Then, assign every dollar that hits your bank account a job, whether that is covering bills or rent, bolstering your emergency fund or paying off student loans.
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Once you have made your budget, you’ll come to the hard part: sticking to it. It may sound dull, but the reality is that “staying on budget as a recent college graduate — or even better, under budget — can ensure your financial goals stay achievable,” said Navy Federal Credit Union.
2. Be open to opportunities to cut costs
Experts say “young workers need to prepare for financial uncertainties and job market challenges by staying frugal and saving what they can,” said Investopedia. This may look like relying on public transportation instead of getting a car or moving to a less trendy but more affordable neighborhood.
Another major way that many young professionals are cutting costs is by moving back home. But make sure you do not end up spending more in other areas just because mom and dad are footing the rent. “Recent grads need to use the money they save when moving back home to set them up for a stable financial future,” said Bruce Maginn, a partner at Solomon Financial, to Investopedia.
3. Start to get a handle on debt sooner than later
Although technically most student loans have a six-month grace period, that does not mean recent graduates need to wait to start paying. “If you can start making payments earlier, you’ll save on interest and establish the habit,” said NerdWallet.
There are situations where student loan debt may not be your primary concern, like if you have other high-interest debt, such as credit card debt. In that case, “put as much as possible toward the higher-interest debt first, while continuing to make minimum payments on other debt,” said Navy Federal Credit Union. “This will save you money and allow you to pay off higher-interest debt quicker, giving you more money to put toward student loan debt repayment.”
4. Use credit, but be smart about it
When finances are tight, pulling out a credit card may seem irresponsible. But using your credit wisely is one of the best things you can do to set yourself up financially. Good credit helps with everything from qualifying for better borrowing opportunities at lower rates when you need them to influencing whether or not you land an apartment when you are ready to strike out on your own.
One of the easiest ways to build your credit is to make payments on time and in full, each and every time. And if you do not yet have a credit card, student loan payments count, too.
