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The year after you graduate college is as good a time as any to get your personal finances on the right track. Here are a few things to keep in mind as you do.
It doesn’t hurt to keep living like a student
The idea that graduating is the start of your adult life doesn’t mean you have to start living like you’re middle aged. Far too many people think that having a roommate (or a few) is a sign you’re not an actual grown-up, but there’s nothing wrong with living with roommates in your 20s (or even beyond if it works for you).
One of the biggest problems in the USA today is isolation. Another is debt. Yet we’re told that we should take the ridiculously expensive (and isolating) step of living alone as soon as possible. Living with roommates lets you share not only rent and bills, but some other expenses. It allows you to carpool more easily and gives you more incentive to stay home a few evenings a week (as long as you and your roomies actually enjoy each other’s company).
Living like a student in other ways doesn’t hurt either. If you feel the need to run out and buy a new car, designer clothes and other material trappings so you feel like more of an adult, you probably need to think a little deeper about what being an adult really means. If you enjoyed a whole bunch of frugal but fun entertainment when you were a student, there’s no need to assume that won’t still work for you after you graduate.
Know your worth
People are fond of telling you you’ll never get rich working a 9 to 5. But that’s not entirely true. Your first job will potentially set the tone for the rest of your career, so it’s good to know your worth and hold out for the right position. That degree means you have increased earning power so think carefully about the types of job you want to apply for and which to accept if you’re lucky enough to have a choice of offers.
This doesn’t always mean go for the highest-paid position. Having a job you love matters too. So do other financial benefits, lifestyle perks (such as flexible hours), how long your commute is, and how you feel about the organisation you’re about to become a part of. Things like health insurance matter as much as salary to some people. Which makes sense when you consider that medical debt is the number one reason for personal bankruptcy in the USA. Look at all the pros and cons, financial and personal, of job offers before making a decision.
Have a plan to pay down debt
It’s likely you graduated with a lot of it and that can feel overwhelming. You’re not going to pay it off overnight, so the key to feeling in control is to have a plan. If your debt is spread around you might want to try the snowball method or the avalanche method. Either way it will help to have debt repayment planned out and factored into your budget. This gives you an idea of when each debt will be cleared, assuming you stick to your plan. You can either create a plan on your own, or you can hire a financial advisor or work with a financial coach to develop a personalized plan based on your individual needs.
Set your goals
Setting both personal and financial goals is vital as a new graduate. When it comes to finances you may want to focus on building an emergency fund, paying down debt, and starting to invest. But depending on your current five-year-plan, you might also need to be saving for big life events such as a wedding or buying a home. You might also have personal goals you want to achieve like traveling the world, or furthering your education, which are dependent on finances.
Knowing exactly what you want your post-grad life to look like, at least in the short to medium term, will help you set the right goals for your finances. Then it’s a case of putting a solid plan in place to achieve them.
A final tip
What you want the day you graduate can change, often in the space of a year or less. That dream job might not be what you imagined. Living in the city might not suit you as much as you thought. That relationship might not withstand the transition to full-on adult life. The travel bug might suddenly bite. Making a financial plan for the life you want, but staying flexible on what that might be, is never a bad idea.
Are you ready to enjoy life more with less money stress?
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To make Wealthtender free for readers, we earn money from advertisers, including financial professionals and firms that pay to be featured. This creates a conflict of interest when we favor their promotion over others. Read our editorial policy and terms of service to learn more. Wealthtender is not a client of these financial services providers.
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