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.
-
The Social Security Test Every Wealthy Retiree Must TakeWhen you work and collect Social Security benefits before your FRA, you are subject to the Retirement Earning Test that could result in a temporary reduction of your benefits.
-
I'm a Government Employee and Need to Get By Until the Shutdown Ends. What Can I Do?The second-longest shutdown in history is leaving many federal workers with bills due and no paycheck to cover them. Here's what you can do to get by.
-
I'm a Government Employee and Need to Get By Until the Shutdown Ends. What Can I Do?
The second-longest shutdown in history is leaving many federal workers with bills due and no paycheck to cover them. Here's what you can do to get by.
-
I'm a CPA: Control These Three Levers to Keep Your Retirement on TrackThink of investing in terms of time, savings and risk. By carefully monitoring all three, you'll keep your retirement plans heading in the right direction.
-
This Is Why Judge Judy Says Details Are Important in Contracts: This Contract Had HolesA couple's disastrous experience with reclaimed wood flooring led to safety hazards and a lesson in the critical importance of detailed contracts.
-
I'm a Financial Pro: This Is How You Can Guide Your Heirs Through the Great Wealth TransferFocus on creating a clear estate plan, communicating your wishes early to avoid family conflict, leaving an ethical will with your values and wisdom and preparing them practically and emotionally.
-
Social Security Wisdom From a Financial Adviser Receiving Benefits HimselfYou don't know what you don't know, and with Social Security, that can be a costly problem for retirees — one that can last a lifetime.
-
Take It From a Tax Expert: The True Measure of Your Retirement Readiness Isn't the Size of Your Nest EggA sizable nest egg is a good start, but your plan should include two to five years of basic expenses in conservative, liquid accounts as a buffer against market volatility, inflation and taxes.
-
Ten Ways Family Offices Can Build Resilience in a Volatile WorldFamily offices are shifting their global investment priorities and goals in the face of uncertainty, volatile markets and the influence of younger generations.
-
Should Your Brokerage Firm Be Your Bookie? A Financial Professional Weighs InSome brokerage firms are promoting 'event contracts,' which are essentially yes-or-no wagers, blurring the lines between investing and gambling.
