As colleges and universities hold spring commencement ceremonies, there's plenty of financial tips for new graduates as they enter the real world. After four years of being under their parents’ wings, some new graduates will secure their first real job ever. With this new paycheck, there are a lot of decisions that need to be made, and unfortunately, some new graduates will make unwise choices. However, help is available. Here are seven savvy and simple financial tips for new graduates.
1. Don’t Defer Student Loans
There are several helpful financial tips for new graduates. For example, new graduates should think twice before postponing repayment of a student loan. Deferment and forbearance are helpful provisions for those who cannot afford payments at this time. But if a new graduate can afford to make his or her payments, he or she should start paying the loan within a year of graduation. This way, he or she avoids additional interest charges.
2. Open a 401(k)
Sure, it'll be years before you retire, thus you have plenty of time to think about your retirement options. Just know that the earlier you start planning, the more cash you’ll have in your retirement savings account in your later years. Therefore, do not postpone opening a 401(k) with your employer as soon as you qualify. Contribute the minimum to get the employee match, if available.
3. Stay at Home
If you can, stay living at home for at least two years after graduating college. There are benefits to this. For starters, this will enable you to save up a down payment for your own house; also, you can build a rainy day fund before taking on additional expenses.
4. Don’t Splurge on a Car
You might need reliable transportation to get to and from work, but you need to keep your car payment reasonable and affordable. Unfortunately, some new grads splurge on a car and get a car payment that's more than they can afford. Even if you live at home, keeping monthly expenses to a minimum maximizes your ability to save.
5. Get a Roommate
If you're determined to move out of your parents’ house, or if you get a job in another state, consider getting a roommate. This person can help cover the monthly household expenses, which frees up money for savings and taking care of other personal financial obligations.
6. Pay Credit Card Balances in Full
To avoid long-term debt issues, make a habit of always paying your credit card balances in full. And if you can't afford to pay off your balances each month, do not make a purchase.
7. Get Rid of Debt
In addition to paying your credit card balances in full, develop a plan to get rid of your consumer debt. The sooner you pay off debt, the sooner you can make other financial decisions without balances hanging over your head. Options include contacting creditors to negotiate a better rate, paying more than your minimum, and only using credit when necessary.
Graduating college is a huge milestone, and as you enter the workforce you'll need to pay close attention to your finances to avoid long-term issues. Educate yourself on the best financial moves and listen to advice from your parents, or other financially savvy people. What helpful tips can you offer new graduates?