New Grad Finance Guide
The start is over, your friends have gone on a hike in Europe for a few months, and you have removed the last empty liquor bottles that you had kept for some reason from the top of the kitchen cabinets. It’s time to leave your ivory tower and join the real world.
And while you’ve put off thinking about student loans for so long, it’s time to seriously think about your money. Whether you just graduated from college or are looking to leave on your own for the first time, here are some things to keep in mind about your finances.
Start saving for retirement now
This is the most boring and yet most important piece of advice you’ll get: Start saving for retirement now , even if it’s $ 10 a month.
If you don’t know where to start, we have a great tutorial . But start with the 401 (k) offered at work, if you have one. If not, consider opening a Roth IRA .
Build your emergency fund
Financial experts disagree on priorities, but I believe you should immediately put more money into a savings account than into your retirement fund right away. You are young and you will have unforeseen expenses (for example, moving to your first job – moving is expensive!).
Experts say three to six months of spending is a good goal, and slightly more if you’re a freelancer or worker and have less job security (and no job is 100 percent stable).
The best way to create your emergency fund is to choose an amount of money that you can comfortably do without and set up an automatic transfer to a savings account (interest payments are not high anywhere, but you will get the most out of your dollar online). If you want to play it, you can try savings or use the app to save for you. Just make sure you don’t overdo it. It will take a long time to improve your financial situation. Like, years.
Make a student loan plan
Many types of student loans have a six month grace period (double check, especially if you have private loans), which means you have six months after graduation (or graduation or part-time status) to find a job and start saving for payment.
Before doing this, make sure you know who your loan agent is, how you will have to pay and of course how much you will be responsible for each month.
If you have government loans, you can choose from a variety of repayment plans , depending on which is best for you, that will help you achieve forgiveness in 20-25 years. Call your service staff to make sure you are enrolled in the plan you want.
You should set up automatic payments to avoid late fees, and know the date when you are due to repay your loans in order to keep the purpose in mind. Bet on making at least the minimum payments every month to avoid default.
Explore Your Health Insurance Options
I talked about this last week , but basically you have a few options: if you are under 26, you can stay with your parent’s plan if it makes sense for your family; you can shop on the marketplace (or see if you are eligible for Medicaid); or you can join your employer’s plan.
Understand the loan and how to increase it
There is a lot to know about your credit score , so read some of our tutorials . But basically, if you’ve never owned a credit card before, you’ll want to apply for one to start building your credit history (and increasing your score). This will help you in the future if you ever want to buy a house, rent something like a nice apartment in New York, or get a high reward credit card.
To read a book
You have completed your studies and you can now start learning in real life. If you haven’t taken personal finance classes, grab a book or magazine to teach you the basics. I love the “ Scorecard” by Heline Olen and Harold Pollack, but there are many good articles on money out there. (Hey, I even have a free youth newsletter you can subscribe to! What a financial responsibility on your part.)
Create a monetary goal
Something I would like to do right after graduation is to set a goal for myself . Financially, I never got into the hot water, but I could have done better in terms of economy and prioritization. I’m drawing attention to this now, but wasted years telling myself that I just don’t make enough money to save a lot. There was always something more tempting to spend my dollars. To this end…
Remember: comparison is a thief of joy
Right after school, we all have friends who seem to be able to afford more than we ever have. They have prettier places, more fashionable clothes, they have great rest and brunch every Saturday. But here’s a little secret: either their parents help them financially, or they are in debt. That’s an incredibly small number of people who can afford it all on their own at 22, so don’t worry if it’s not you. In your early 20s, the movies seem to make you look adorable and fun, but they’re actually pretty damn tense.
But you can handle it. Define your monetary goal, make a plan for reaching it, and make sure you have other financial ducks in a row. Focus on things you can control (and maybe log out of Instagram for a while). You will be much better off from this.
And we all make mistakes
The first few years after school are going to be tough. Very hard. You will make mistakes in almost every area of your life (be prepared!), And especially with your money. When you hang out with friends, you will spend too much money, start investing later than recommended, buy a lot more happy hour drinks and apps than you should, and maybe even go into debt even more. You will miss out on credit card payments and spend tons of money moving because you didn’t plan ahead. You buy a cheap couch, and then you have to buy another cheap couch three months later when it collapses.
And guess what? Everything is fine. Everyone has made these mistakes, and sometimes some. It’s important to get rid of them, learn from them, and promise to do better in the future.
This should be remembered, but not all that bad. You have time to study. So, congratulations graduate and good luck.