Dealing with finances is one of the most common dilemmas that college graduates face. Upon finishing school, these graduates find a job and start to earn a living. However, since schools only taught the necessary knowledge and skills in order to earn a living and not how to manage money and make it grow, most of these graduates struggle financially and can’t seem to take a step forward in being efficient in finances.
Financial planning and managing is a skill and just like the things that schools taught, these are things that must be learned as well. Good money habits doesn’t happen by luck nor overnight. It is a result of careful planning and execution of the plan. College graduates must be smart when it comes to finances because it is normally the barometer between success and failure. People who have more money are basically more successful than those with less or without. Good money habits is a manifestation of having good values and character. Below are some tips on what college graduates should do in order to be more efficient with their finances and develop some really good money habits and skills.
1.) Choosing the right job. Having the right job is very important because such passion towards the job will make a person stay for long and in the long run provide a good steady stream of income. What are the keys to consider in choosing the right job? First is one’s interest towards the job. If interest is low, there is a good likelihood that one will not last long even if the pay is good. The saying “love your job” is true. Second thing to consider is the pay. People work for the very reason of getting paid and earning an income. Without the salary or wage, only a very few will work or render service. The right job is a mix of the two, the passion or love towards the job and having a good pay. If both are present, interest is going to be high.
2.) Setting career and financial goals. One mistake that most college graduates make is not planning their career path while it is still early and tend to enjoy life. They spend their salaries partying, going on vacations, and buying expensive things that they really don’t need. In short, most of these people aren’t being practical. Setting goals eliminates such waste of time and money. Goals makes one’s success visible and at the same time will serve as a driving or motivating force. Opening a savings account, investing in stocks or mutual funds, getting a healthcare and insurance programs, or starting a business are good financial goals. At least one’s hard earned money doesn’t go to waste and is being used well.
3.) Building assets, minimizing liabilities. Building assets take time and there is no better time to start than being young. It is the execution of the financial goals. The truly rich and wealthy people are people who doesn’t rely on active income or income through one’s effort but rather through passive income. Building streams of passive income takes time but they give very wonderful rewards. If one starts young, the room for growth is still very huge. On the other hand, minimizing liabilities contribute a lot. Minimizing the use of credit cards and unnecessary expenses can make one’s cash flow more efficient. Building assets and minimizing liabilities require lots of discipline and knowledge.
4.) Financial education. Just like in school, the necessary knowledge and skills in having and building a career is being taught. However, schools just can’t teach everything. Investing in financial education improves one’s chances of succeeding financially by leaps and bounds. It is just like going back to school but in financial education, one’s knowledge, skills, mindset, and approach towards finances is being improved. Success doesn’t happen overnight or by luck. It happens with knowledge, planning, careful and consistent execution, and the persistence. Everything rises and falls under knowledge.
5.) The magic word “Budget”. Ideally, having a budget in all things, even the smallest ones, is important. It can make one see what things are really important and what are the things that can be set aside for a while. Statistics show that nearly 70% of the people all over the world make a budget but unfortunately, a measly 15% out of those can follow it. Not following a budget is just like not having any budget at all. Budgets serve a purpose and that is to distinguish needs from wants and what’s important from what’s not. Budget will keep one from impulsive spending, one of the biggest causes of financial strains. Following a budget can make one a lot more efficient in managing finances and at the same time will make cash available during some times of need.
6.) Minimizing credit card use and being practical. There is a need to stress this out in detail. Credit cards are among the top reasons for bankruptcy in almost all parts of the world. Banks and financial institutions do a very great job in advertising credit cards because it gives them business. People who don’t plan and manage their finances well get into the credit card trap and spend the money that never even passed in their hands or in short, put them in debt. Most college graduates have credit cards on their wallets or bags, some even have more than one which gives them multiple debt streams. Minimizing credit card use is very important because once it gets out of hand, it will create a life of its own and enslave its possessor in debt.
Other than credit cards, there are some things that college graduates really love to have but may hurt them financially. Some college graduates immediately buy a house, a car, or gadgets to satisfy their wants or long time ambition. There is nothing wrong with being ambitious but it must be done with discipline and planning. A house is a liability by its own right because it doesn’t appreciate in time and will cost a lot in repairs and maintenance. A house doesn’t appreciate, a lot or land does. Having a car is good, it is comfortable. But cars also cost a lot such as maintenance, fuel, regular checks, etc. If such car isn’t being used as a money making machine such as deliveries for business or meeting clients, its of no use.
Summing it all up, if it will help put money in one’s pocket, it is an asset and will help but if it is something that pulls out more money than it brings in, it is a liability and must be avoided.
College graduates should start develop discipline and practicality. Money habits can either make or break a person. Good habits and mindset towards finances must be developed, bad ones must be gradually worked on and eliminated.