Graduating from college in a tough economic environment can make it hard to figure out financial priorities. Between student debt, a weak job market, and credit card debt, it can be overwhelming to figure out where to start. However, the upside is that as a young college graduate, there is plenty of time to overcome mistakes and even room to make some more.
Below are some ways to ensure that you can fulfill your needs and wants without sacrificing financial goals.
Debt can be a huge barrier to reaching financial goals and even student debt cannot be erased through bankruptcy or retirement. However, debt can also be a good thing and smart management of your debt can show lenders that you are serious about your financial future and can be trusted with more significant debt, such as a house or car loan.
Make sure that monthly payments are made on time; this can be done through automatic deductions from a bank account. If credit card debt is the problem, the snowball method is considered a strong tool to reducing debt. By taking all credit card debt and paying off the smallest debt first, it provides a sense of accomplishment and momentum that makes it easier to pay off the next bigger debt and the next one after that.
It may seem counterintuitive to save if there is debt to be paid, but one of the most useful habits is to learn how to save. Even if you only start with small amounts, you will get into the habit of setting aside money for bigger financial goals, such as saving for a house or retirement. Over time, small amounts can become very significant sums of money.
There are numerous tools that make it possible to automate the saving process. For many people, if the money is put into a savings account before it ever reaches their checking account, the money is not missed.
Recognize where small amounts of money are being drained out of daily expenses. Eating out every day or going out for a daily coffee break can add up over time. By making the commitment to rethink or reduce one of these expenses, this money can go into saving for something more significant. Eventually, opening an investment or retirement account will become the natural next step.
Recent college graduates have a tough road ahead in an uncertain economy. In addition, there are more options today for personal finance than ever before in history. Although it may seem overwhelming at first, if you can adhere o simple principles of money management, young people can succeed on the path to financial happiness and security.