Graduating college is a huge achievement, deserving of the celebrations that typically go along with it. With a diploma in hand, you can see the world open wide for you, and the possibilities for your future can seem endless. On the other hand, adulthood comes with rent, car payments, job searches and student loan repayments—and the financial demands can also seem endless.
Here are six tips for recent grads to help you stay financially responsible while trying to get your life in the real world started.
1. Develop a budget or spending plan.
Think about your monthly income and what expenses you have. First, consider your basic needs, such as food, shelter and clothing. How much money do you need for groceries, rent, gas and utilities? Devise a budget and stick with it.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
2. Make sure you have a student loan repayment plan.
According to studentaid.ed.gov, recent grads have several options for repaying their student loans. Ignoring the situation is not one of them. Even if you can't make a payment, you have to deal with it responsibly and devise a strategy to repay it when you can. There are options such as lowering the monthly payment or applying for a deferment or forbearance, which stops the student loan bill for a determined amount of time. Visit www.StudentLoans.Gov for more details.
3. Start a rainy day fund.
Put extra money aside for emergencies. Life is uncertain: the car could have issues, or you could have a dental or medical problem. You want to have enough cash on hand to cover any of these kinds of situations when they inevitably occur. Furthermore, consider the domino effect: if the car needs to be fixed, how are you getting to work? Always think, "What if?" And plan ahead.
4. Know your credit history.
Being financially responsible decreases the odds of falling behind on bills, which can damage your credit score. A poor credit score may result in higher interest rates when applying for loans. If you have bad credit, you might not qualify for a car loan or mortgage. It could even cause issues in attaining a good job. Also, many landlords will check your credit history before renting you an apartment. You can check your credit report for free at www.annualcreditreport.com. The site is a helpful resource for learning about credit scores and obtaining tips to improve a spotty credit history.
5. Protect yourself with insurance.
According to the National Association of Insurance Commissioners (NAIC), the average renter's insurance policy costs between $15 and $30 per month. Renter's insurance provides a safety net in case you get robbed or your apartment burns down. You might think it'd be cheaper to replace stolen or damaged items, but being held liable for an accident in the apartment would be more costly. And some landlords may require you to have it.
Health insurance is definitely required. Your employer likely offers this benefit. However, even if you don't have that option, health care can still be accessible and affordable. At www.healthcare.gov, you can find several options for recent college grads.
6. Start thinking about retirement.
What, you can't possibly be thinking about retirement!? Think again. Sure, you're young and just starting out. However, it is crucial that you start retirement planning as soon as possible. Think of it as wealth accumulation. It's a trifecta: Time value of money, tax deferred growth and compound interest all working for you to help you accumulate wealth for your future. Plus, if your employer offers a match or contribution to your 401(k), you need to take advantage of that. Don't leave money on the table.
Using these simple tips will make life easier and more affordable—and you'll be well on your journey to wealth creation.
Marguerita M. Cheng is the Chief Executive Officer at Blue Ocean Global Wealth. She is a spokesperson for the AARP Financial Freedom Campaign, a CFP Board Ambassador and proudly serves on the FPA National Board of Directors.
-
What to Do About These Three Medicare Changes During Open EnrollmentWith costs due to rise sharply next year, look for coverage that protects your wallet as well as your health.
-
Use the 'Newton Rule' to Grow Your 401(k) Retirement SavingsHarnessing Sir Isaac Newton's rule of retirement can boost your 401(k) savings while you chill.
-
Five Retirement Planning Traps You Can't Afford to Fall Into, From a Wealth AdviserTo help ensure you reach your savings goals and enjoy financial security in your golden years, be aware of these common pitfalls. The key is to be proactive, informed and flexible.
-
Your 401(k) Can Now Include Alternative Assets, But Should It? A Financial Adviser Weighs InMany employer-sponsored plans offer limited investment options, which can stunt growth. But participants considering alternatives might need some sound advice to get the most from their accounts.
-
Will Taxes Shred Your 401(k) or IRA During Your Retirement? It's Very LikelyConventional wisdom dictates that you save in a 401(k) now and pay taxes later, but turning that rule on its head could leave you far better off. A financial planner explains why.
-
More Retirees Are Renting: Should You? A Financial Adviser Weighs InIn some ways, renting is cheaper, more flexible and easier, but unless you understand the implications for your taxes and health costs, it might not be for you.
-
I'm an Insurance Pro: Everyone Needs to Prepare for Earthquakes, Even if You Don't Live Near a Fault LineHere are my tips for what to do before, during and after an earthquake. The more prepared you are, the more you'll be able to keep your wits about you if it happens.
-
Where There's a Will, There's a Way Your Assets Will Be Distributed as You WishYour will is the backbone of a strong, adaptable estate plan that ensures what you leave behind goes to your selected beneficiaries. Without a will, state laws determine who gets your assets.
-
I'm a Financial Adviser: This Is What You're Really Losing if You Cut Back on Your 401(k) ContributionsMissing out on the benefits of the employer match and compounding growth could force you to work longer and lower your standard of living in retirement. Here are some alternative options.
-
Preferred Bank Stocks: The Investment Retirees (and Others) May Be Missing Out OnMost large banks issue preferred stocks that pay out fixed dividends, often with higher yields than bonds. Should you make room for them in your portfolio?
