Keep your Career Options Open
If you’re a recent graduate just entering the job market, it’s important to keep your options open. When you’re looking for jobs, search for a variety of open positions even if they aren’t exactly what you studied to do.
Money is money. Don’t hold yourself back from a good opportunity just because it doesn’t fit your ambitions to a T. Every job from here on out is a steppingstone. Right now, it’s better to have financial security than it is to have the job of your dreams.
Make a Plan for your Student Loan Debt
If you have any student loan debt, it’s time to start thinking about how you’re going to pay it off. The first move you should make is completing the student loan forgiveness form if you have any federal student loans. The student loan forgiveness plan includes loan forgiveness of up to $10,000 or $20,000 for qualified applicants.
To qualify for loan forgiveness, your individual annual income must be less than $125,000; if you are married, your joint income must not exceed $250,000. Typically, the more student federal aid you received, the more you will get back from the debt relief program.
If your income meets the requirements and you received a Pell Grant, you will be eligible for the maximum amount of debt relief ($20,000.) However, if you did not receive a Pell Grant you will only be eligible to receive debt relief up to $10,000.
Unfortunately, debt relief will only cover federal loans. All private loans will need to be covered by you. Private student loan lenders usually provide loans at much higher interest fees than any federal loans, so you’ll want to start paying them off as soon as you can.
This can be extremely intimidating, but it’s totally possible to get out of student debt in just a few years. Here are a few debt repayment strategies to help you through.
The Snowball Method
With this method, you’ll start by paying off the smallest amount of debt and work your way up. Make minimum payments on all of your debt and contribute even more to your loans with the least amount of debt on them to get them out of the way faster.
This option is ideal for those who are overwhelmed with the amount of debt they have, but all of their loans have a similar interest rate.
The Debt Avalanche Method
While making minimum payments on all debt, contribute even more to your debt with the highest interest rate. Once you’ve paid off the loan with the most interest, work your way down line.
This method is ideal for those paying off high-interest debt, which is likely to be those with private student loans. The faster you pay off high interest debt, the less money you will pay overall.
Debt consolidation combines all debt to one account. This can streamline your payments and even reduce your original interest rate. If your private loan interest rate is unreasonable, this option might be worth looking in to help you pay less over time.
Estimate your Future Expenses
When you leave college, you will likely be taking on more expenses than you’re used to. If you held a job throughout college, you’re probably going to have to use your paycheck differently than how spent it at school.
Now is the time to have a candid discussion with anyone who has been supporting financially throughout your degree. Are your parents covering your phone bill? Do you have a student stipend to cover groceries?
Take note of everything that you are not paying for now that you will have to pay for in the short future and prepare for it.
Build your Credit
Your credit is extremely important in your post-grad life. A good credit score opens doors for you, and a poor credit history or lack of credit can keep you from having complete independence.
Once you have a steady income, it’s time to build your credit. If you always spend within your means, pay back in full, and pay your bill on time- you will be fine. The longer you keep up these good habits, the stronger your credit will become.
Prioritize Retirement Savings Now
It may seem like a long way away, but what you save now will make a giant impact on your future. The more time your money has to compound, the more you will get to retire with. The amount of time that your money stays in a retirement fund is just as important as the amount of money that goes into it. Let’s break it down.
Let’s say you contribute 10% of a $50,000 salary to your 401(k) every year, with an expected annual return of 6% and an expected salary increase of 3% every year.
If you start contributing at 20 years old with these conditions, your 401(k) balance will be $1,713,751 at the age of 65. But if wait to start saving until the age of 30, your 401(k) balance at age of 65 will be $836,399.
Waiting 10 years to start saving makes a $877,352 dent in your potential retirement fund. Once you secure your first post-grad job, start contributing to your retirement fund as soon as possible.
Stay on Top of It
Automated banking is the norm, but that doesn’t mean that you should let everything happen in the background. Take the time to check in on your finances every day, especially if you have steady automatic payments.
Staying on top of things can keep you from over drafting your accounts or defaulting on any essential payments.
Establish “No Spend” Days
Did you know that $27 of miscellaneous spending every day adds up to $10,000 every year? When you don’t keep a strict budget, the little things can add up fast. Our go-to tip for avoiding these uncategorized and unbudgeted expenses is to set “no spend” days in your calendar.
No Spend days can be just one day a week, or it can be several days a week. No matter how you decide to schedule them out, make your no spend days a hard rule. This frugal lifestyle change can help you save money that you didn’t even realize was impacting you in the long run.
Your post-grad finances are going to look different than they ever have before, but with preparation and tenacity you’ll have it down in no time. Throughout your new personal finance journey prioritize your savings, budget responsibly, and limit your unnecessary purchases as much as possible.