Five Financial Tips for Recent College Graduates
Graduating from college is a huge achievement and a milestone worth celebrating - no more classes, exams, pop quizzes and projects. As a fresh graduate, you’re embarking on a new journey to become financially independent so it is important to create a plan that will set you up for financial success.
Most people think that when they spend less, they save more - yes, part of this is true but being thoughtful with your strategies will help you manage your finances better.
Follow Clark County Credit Union’s simple steps to reaching your financial goals:
1. Map out a monthly spending plan
A spending plan, aka budget, is more than just setting aside your money every month. To have a better system, Elizabeth Warren, a senior US senator from Massachusetts and a bankruptcy law expert has developed the 50/30/20 rule.
The 50/30/20 rule is allocating your take-home pay or earnings after taxes like this: 50 percent to your needs (your rent, grocery, utilities, transportation, etc.), 30 percent to your wants (shopping, dining out, gym membership, etc.), and 20 percent to your savings or a portion of it can go towards paying off your student loan or debt.
In simple terms, your monthly expenses should not be greater than your take-home pay. By having a basic outline of your budget, you can easily adjust your expenses according to your lifestyle.
2. Build an emergency fund
Life happens - like when your tire pops, or a medical emergency arises. These two scenarios are just an example of life’s surprises.
As a responsible young adult, it only makes sense to have an emergency fund. Your emergency fund should be 3-6 months’ worth of your expenses. By having a separate fund for emergencies, you will have peace of mind knowing you have an allotted cash reserve for different life scenarios.
3. Establish credit
As a fresh graduate, one of the important financial tasks you will tackle moving forward is your credit score. Building your credit score will open new doors and opportunities such as purchasing a new car, renting an apartment, and other kinds of loans. Your credit score will determine how likely you are to pay off your debts.
A good way to start building your credit score is to open a credit card with a low credit limit. In that way, you are not tempted to make big and unnecessary purchases.
4. Set up a retirement account
Your future self will thank you for contributing to your retirement early. Most employers offer retirement contributions after one year of service. Financial experts recommend investing 12 to 15 percent of your income into your retirement. Get in touch with your company’s benefits specialist and get started with your retirement contribution as soon as you are eligible.
5. Enjoy your hard-earned money
Apart from working hard, it is also important to enjoy your hard-earned earnings and experience life. John Walters once said, “Life is short, so enjoy it to the fullest.” When you’re able to take a vacation, know that you deserve to spend time away from the hustle and bustle. Or if it’s a purchase you have been wanting to make, go and do it when you have the means.
To plan for your vacation, use our free Vacation Affordability calculator to learn how much you need to save every month.
At Clark County Credit Union, we understand how confusing and overwhelming it is to navigate through the real world. We have free resources available for recent college graduates that provide an in-depth understanding of different financial topics. Visit Banzai, our financial educational partner, today!