When you’ve just graduated from college, you probably have two goals in mind: one is to relax for a while and recover from the pressure of exams and the other is to find a job so that you can start to pay back your student loans. However, once you have that job, you need to look a bit further ahead than just paying off loans. There are a number of ways that you, as a new college grad, can ensure that your financial future is rosy.
Live within your means
You are probably relieved to be earning money and not to have to scrimp and save any more. However, that doesn’t mean that you can go crazy and start buying whatever you want. As soon as you know exactly how much take-home pay you have, draw up a budget and make a note of how much money you have to spend on entertainment and luxuries. Try very hard not to go above that amount; don’t make the mistake of thinking you can overspend and then make up for it the next month, because you probably won’t.
Aim to pay off loans as soon as you can
If you are very lucky, you will finish college with a clean slate, but the chances are that you will owe a great deal of money in student loans. There may appear to be no rush to pay off these loans, especially if you are not yet earning the minimum amount required before you need to start paying; in the UK, for example, you should be earning £21,000 before you have to start paying back loans. However, the sooner you do so, the better so that you will really be able to concentrate on saving money for your future and investing in a property.
Save at least 10% of your income
It is easy to presume that you have the rest of your life to save, but get into the habit of doing so as early as possible. Try to save 10% of your income, putting it into a long-term investment plan so that you can make the most of compound interest and you won’t be tempted to spend it. Look around for the best investment options. If you really find that you cannot put a certain percentage aside every month, then look at ways that you can change your spending habits; perhaps moving somewhere cheaper would be an alternative.
Pay into a retirement fund
Like saving, you may not be able to see the point of paying into a retirement fund; after all, you probably have at least forty years of work in front of you before you retire. However, the sooner you do so, the better. If you have a job that doesn’t pay into a retirement fund, do some research and find out private options – this is something to consider as an extra even if your job does include regular pension payments. The earlier you start, the less you’ll need to panic when you reach your forties and start seriously thinking about pensions.
Look after your credit
There will be times in the future when you need to borrow money from the bank, perhaps for a house or a car, so make sure you keep an eye on your credit rating. Don’t let credit card bills stack up; pay them off in full each month. Research ways that you can ensure your credit rating is as good as it can be. Check your credit files regularly and if you see any discrepancies, then get them changed. In the UK, you can check your files for free, or for a very small fee, so make the most of the opportunity.
Make sure you have the required insurance
Don’t be tempted to skimp on insurance because you see it as just another bill to pay. Reflect on what would happen if your house was burgled and you lost your computer, iPod, mobile phone and other electronic goods – if you are insured, you can claim for them, but if you aren’t, you will have to pay for it all out of your own pocket. In some countries, health insurance is vital, but something that you may not consider when young and healthy. Pets can also prove to be very expensive if they become ill and you have hefty vets’ bills to pay.
The sooner you start taking your financial responsibilities seriously, the better. If you don’t, you will regret it at some point.