The Personal Finance Advice Every College Graduate Needs
For years, you lived on a college budget, getting food wherever you could, buying gas from trip to trip, and never once thinking about the term “401(k)”. Getting that first paycheck from your employer will feel like more money than you know what to do. But before you start daydreaming about fancy cars and beach vacations, make sure you have long-term canards by following these ten financial tips.
Know your value in salary negotiations
It’s hard to negotiate your first paycheck , but you have leverage. Use the resources at your disposal, such as your college’s career center and other recent college graduates in your industry, to evaluate whether an offer made to you has sufficient market value. Otherwise, you certainly don’t need to accept the first offer that comes along.
Be realistic about moving
After surviving four years on the loose, you probably don’t intend to go back to your parents. But if it’s an option, it’s worth considering, especially if you’re among those saddled with significant debt. Saving on monthly rent payments saves money and pays off loans at a more impressive rate. In addition, you will need a stash before you sign a lease .
Match your company’s 401(k) contribution
When you get a job, you will have to decide what percentage of your salary you want to put into your 401(k) retirement plan . Your employer will most likely offer you to compensate your contribution up to a certain percentage; you want to make sure you deposit at least that amount. If they offer up to 3%, deposit at least 3%. Doing anything else would be leaving money on the table, and the interest on that money would increase significantly over time to prepare you for retirement.
Open a Roth IRA
I know all these terms sound intimidating and confusing, but they are not. A Roth IRA is simply an account where you can deposit up to $6,000 a year to invest and don’t have to pay taxes on the profits when you withdraw it in retirement. Invest the full $6,000 every year if you can, and invest in long-term, low-risk investments.
Do your due diligence regarding health insurance
If this is an option for you, stay on your parents’ health insurance for as long as possible. If not, consider which of the plans offered by your employer is right for you. For example, you may not need the most expensive option if you don’t foresee the need for a low deductible. And if you don’t know what that means, here’s a good place to start.
Create a credit score
Your credit score matters because, ideally, one day you make a purchase when you need to take out a loan. Building a good credit history is not difficult, it can take some time. You can improve your credit score by making timely payments on a secure, low-limit credit card, paying your utility bills, and even reporting your rent (if you have a rent). Start early and thank yourself later.
Create a budget
It’s scary at first, but it’s important to know how much money you’re spending and on what. Many people like the 50/30/20 rule : spend 50% on necessities (such as rent, groceries, and minimum mortgage payments), spend 30% on luxuries (such as travel, takeout, and concert tickets), and spend 20% on savings and additional payments on high-interest debt.
Manage your student loans
Once you have graduated, you usually have a six-month grace period before you need to start paying off these student loans. Sit down and find out how much you have in federal loans versus private loans, compare interest rates, and make a plan of action on how best to pay them off.
Buying a car
Unfortunately, due to inflation , now is not the best time to buy new or used cars. If you think you can do without it, this might be the right decision. But if having a car is non-negotiable, just remember that you will need to account for recurring budget items such as car insurance, gas, and frequent car maintenance.
Set aside some money for entertainment
Saving money is great, and it’s important for your future. But it’s important to put some “fun money” into your budget. Find small ways to go broke by buying concert tickets or going to a trendy restaurant—just don’t go into debt to do it.