Have you prepared your college age kids on how to make smart money decisions? The answer from many parents is no. Many kids go through college and graduate without a true grasp of personal finance. Luckily, we are here to share some of the most important personal finance tips they will need as they head out into the world post college.
Once you have finished school, you are given a grace period of six months before you need to start paying back your student loans. It is critical that you start off on the right foot by beginning your payments on time. If you don't, you could end up falling way behind and it will be very difficult to get back on track.
Overdraft fees and late fees can really drain your money. Get ahead of them by setting up alerts with your phone. For every bill you have, set up a payment reminder at least five days prior to the due date. With your bank account, set up text alerts for when your balance falls below a certain amount. With all the technology available today, there is no reason to be incurring these types of charges.
Not next month, today. So many people today do not have even a few extra hundred dollars saved for a rainy day or unexpected expense. This is a crucial step to being financially stable. Set up automatic transfers to a savings account for every paycheck. Come up with a number that is in line with your personal budget. As time goes on, if you can increase it, do so. Raises or any other extra money that comes your way should be put into this account as well. As you see this account grow, you will start to feel more in control of your finances.
If you have not gotten a job that offers a workplace retirement plan or you just started and you have to wait to be eligible, the next best thing you can do is put money into a Roth IRA. The maximum yearly investment is $5,500. If your work does offer a plan with an employer match, you should contribute just enough to receive the max and take the remainder and open your own Roth IRA. If your work happens to offer a Roth 401(k), all your retirement savings can go into that one account.
Live by these words and you will be in great financial shape. You will find that you can pay your credit card in full each month (though you should try and go the cash diet route) and even have extra to save for other things like a vacation. At the end of the day, living this way will put you on the path to financial freedom.
One of the first things you should do with your student loans is to look at the interest rates. Chances are they are high and you can save tons of money if you refinance them. First, check out the Federal Student Loan Website and see how much you owe and at what interest rate. Then do some research for the lowest student loan refinance rates. You will end up saving a nice chunk of change.
Fresh out of college you are young and full of energy. Now is the time to get in as many money making jobs as you can. Nowadays, there are so many different ways to make extra income. From dog walking to becoming an uber driver, it is up to you to go out and make extra money. The future value of the money you make now while you are young is very high and if invested correctly, can be worth a great deal in the future.
Investing money is a foreign subject to most people and they think they need to wait until all their debt is paid off and they are making a lot of money. This is not the fact. When you are young, time is on your side. Start as soon as you start making your first paycheck and you will see a great return on your money over time. For example, say you invest $20 and it grows 10% over one year so you now have $22.00 and the next year it grows again 10% on top of last years number. You keep making more money on your growing interest and when you add money to it, it further compounds. The key takeaway here is never wait to start.
Nowadays, most college graduates are entering the world with a sizeable amount of debt on their hands. In addition to that, they probably are carrying debt on a couple of credit cards too. This can get out of control post-school if you are not careful about making your payments in full each month. If you are in this situation, it makes sense to look at paying off your credit card debt first. Credit cards usually carry a higher interest rate than student loans.
Ideally, you want to keep your balance as low as possible, pay on time each month so your credit score stays in good standing and give careful thought before opening any new accounts. Those 20% off offers from stores can be enticing but do you really need another credit card?
Although you are just starting out financially when you get out of college, it does not mean you can't enjoy life while trying to pay off your debt. There are tons of ways to still have fun and socialize without breaking your budget.
Here are some ideas to get your creative juices flowing:
When you are first coming out of college, you may be just learning how to navigate your new financial life. The faster you get things in order with your finances, the better off you will be down the road. Always remember to be careful about how you spend your money and keep the future in the back of your mind whenever you are contemplating spending more than you should. There may be setbacks along the way, just stay focused on your financial goals and you will get where you want to be.