Our Top 5 Financial Tips for Every New College Graduate
Congratulations on completing your college education and beginning the next chapter of your life with a solid foundation built on your education. After finishing college, graduates enter a period of transition when they are faced with many potentially life-changing decisions: where they will live, what their jobs will be and how they will handle their finances. It is essential to get the answer to this last question right because handling your finances shrewdly, now, will change the rest of your life. Consider the following five tips to jumpstart your finances.
1. Manage Student Loans
According the Federal Reserve, U.S. students owed over $1.4 trillion in student loan debt in 2017. On average, nationally, that works out to about $17,126 owed per college graduate. In Massachusetts the average student owes around $19,000, according to Business Insider. Find out the exact terms of your existing student loans, especially interest rates, and consider consolidating or refinancing to pay off debt quickly at a lower rate.
2. Minimize Expenses
Pinch your pennies and drop them into a savings account or loan payment. Living with your parents, post-graduation, might not seem ideal, but could save over $2,200 monthly in rent in Massachusetts. Staying home just one year could save over $26,000! If you must move, find roommates and minimize additional expenses.
3. Make a Budget
With your new salary and monthly expenses, you need a budget to track spending while meeting both savings and debt payment goals. Online budgeting tools make creating and using a budget easy. A budget accounts for the money you make and spend, ensuring you know and decide exactly where every dollar goes. A budget can also help you establish an emergency savings account so that you can avoid covering unexpected expenses (medical bills or car repairs) with high interest credit cards, which leads us to the next point.
4. Avoid Credit Card Debt
It is tempting to pay for a vacation, root canal or set of tires with the swipe of a credit card, but you want to do everything you can to avoid this type of debt. The high interest rates on credit cards turn paying even small amounts into feats of Herculean strength. For example, if you pay $100 monthly on a credit card with a balance of $5,000 accruing 20% interest, it will take 109 months and $5,840 in interest (more than the original balance) to pay off the card. Maintain an emergency fund to cover unexpected costs and save to pay for vacations in cash.
5. Save for Retirement Now
As a recent college graduate, retirement feels distant. But saving a little each month, now, can help you secure a comfortable retirement – thanks to compounding interest. Take advantage of your company’s retirement plan or start a Roth or Traditional IRA. Even though you have student loans to pay, start putting money aside for retirement as soon as you begin working.
All of us at Members Plus Credit Union congratulate you on your graduation and wish you the best of luck as you begin the next chapter of your life. Whether you are saving for a car, paying down student debt or saving for a down payment for a condo/house, we welcome you to come to us for financial guidance post-graduation.
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