For recent college graduates, there is a lot to figure out. But one of the biggest adjustments they will face is their newfound financial freedom, which can be both exciting and challenging. The summer after graduation, then, is the perfect time for these recent grads to take some key steps to get their bearings when it comes to dealing with their own money.
- Budget, budget, budget
The most important thing to do when you're first out in the "real world" is to take a good look at your financial situation. As soon as you land that first job and know what you will be taking home after taxes, start breaking down your expenses. The recommended amount of your income to spend on rent or housing is 30 percent, but if you can spend even less than that by renting a smaller place or finding roommates, your financial situation will reap the benefits. Take into account your other expenses – car payments, cell phone bills, student loans, groceries – and be reminded that some bills, such as electricity and car insurance, can vary in price based on where you live.
- Do your homework
You may have closed your textbooks for good, but that doesn't mean you're done learning. Take some time to do some reading about good money habits and financial strategies – you've already started by reading this article! The more you know about money, the more confident you will feel about handling your own finances.
- Start saving right away
As soon as you start making money, you should start saving money. Best practice is typically to save about 20 percent of your paycheck. In doing so, you will begin to build wealth in addition to creating an emergency fund. Most savings accounts allow you to automatically transfer money, so if you're on track with your budget, automating your savings will ensure that you're not forgetting or avoiding putting away money.
- You're never too young to plan for retirement
Just as you should start saving right away, it is also wise to start contributing to your retirement from the get-go. Look into your company's 401(k) plans – most companies will match your contribution. However, some may not begin matching until you reach a certain age. Don't take this to mean that you should wait until then to start contributing. These companies typically still allow you to begin a retirement plan and start setting money aside on your own.
- Tackle those student loans
You're likely staring down a pretty hefty chunk of student loans that may seem like they're going to take your entire life to pay off, but this doesn't have to be the case. First, double-check when your grace period ends to make sure you don't miss any payments and get hit with late fees and extra interest. Also, do your research on repayment options and look for the one that best suits your needs and projected timeline. If you're unsure what is going to work best for you, you may consider consulting a financial advisor or loan specialist. And finally, if you can afford to put more money towards your loans than your monthly payment, you will thank yourself later when you're out of student loan debt long before you thought you would be.
- Keep your credit card debt down
Similarly, try to keep that credit card safely tucked away in your wallet, but if you do accumulate some credit card debt, work to pay it off completely as quickly as possible so as not to damage your credit score. If you can't pay it all off, ensure that you are at least paying the minimum and paying it on time.
- Consider a side hustle
Millennials have seemingly perfected the art of the side hustle. Not only is taking some side work a good financial idea, it can also help you hone your skills and explore other avenues, which can lead to bigger and better career prospects down the line and – let's face it – help you figure out what you actually want to do with your life.