Yahoo Finance 5 Things You Need To Do When Creating Your Post-College Financial Plan
Graduating from college is one of those significant milestones many people dream of achieving. But it also means you’re embarking on an entirely new stage of life.
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And a big part of that should require strategic financial planning.
“The starting point for any money plan is setting goals,” said Kevin Huffman, personal finance specialist and owner of Kriminil Trading. “Do you want to take a trip around the world? Buy a car? Put down a deposit on a house one day?”
The first step he advises is to write down your short-term (less than one year), mid-term (3-5 years) and longer-term (10+ years) goals.
“Last year, a Pew Research Center survey found that the majority of millennials (64%) make financial security a life goal,” he explained. “Identifying your objectives allows you to take steps to prepare yourself financially and monitor your progress toward fulfilling them.”
Below are more things experts say you need to do when creating your post-college financial plan.
Create a Budget
“There’s no need to live paycheck to paycheck,” Huffman said. “First, determine roughly how much you make from your full-time, part-time or side work — and subtract your current or projected rent, utilities, groceries and transportation.
“Then download one of your favorite budgeting tools or apps to help you track your cash flow and categorize your expenditures, so you can find money savers you can bank. Don’t forget to budget for student loan payments, which a recent report by the Federal Reserve showed at $30,000 on average for recent grads.”
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Create an Emergency Fund and Emphasize Savings
“Try to build an emergency fund that will cover 3-6 months of living expenses,” Huffman said. “An emergency fund is a great foundation to reduce financial stress in the event of the unknown and unexpected — a job loss, medical bills, etc.
“Start small by automating a portion of your income into a savings account. Over time, this fund will build.”
David Bakke, financial expert at DollarSanity, agrees this is a crucial step.
“Any financial plan you make as a recent college grad or soon-to-be should have an emphasis on savings,” he said. “There should be sections in the plan for creating an emergency fund, saving for retirement and how you’ll save for long-term purchases. In short, the more you save, the better off you’ll be in any instance.”
Invest In the Future
“Your biggest financial asset is time,” Huffman said. “Even small amounts of money invested regularly can pay off big in the long run.
“Get acquainted with options such as a Roth IRA, which lets you invest after having paid taxes on the money but still grow your contributions tax free,” he added. “Invest in low-risk passives and gradually build up your portfolio over time, as your knowledge and your risk tolerance increase. The best investors are patient.”
Never Spend More Than You Make
“If you’re just getting out of college and starting to make your own money for the first time, adopt a tremendously simple rule: Never spend more than you make,” Bakke said. “Translated: Never carry credit card debt. Credit card debt can be the death knell of your finances if you let it.
“Commit to never falling into that trap.”
Pay off Debt
According to Huffman, student loans can be one of the biggest money burdens that graduates face.
“Sit down and come up with a repayment plan. Understand what your options are and choose the one that’s best for you,” he advised. “Think about other ways to make money and apply the profits toward paying off your debt. Every extra penny you put toward your loans is one less that you’ll have to pay in interest later.”
Bakke agrees that you should include student loan payments in your financial post-college plan.
“Although the current government administration is forgiving some student loans, never count on that,” he said. “Any plan you put together as a recent college grad or soon-to-be should have a line on it for student loan payments. It’s in your best interest to get these paid off and put in the rearview mirror as soon as humanly possible.”
Justin Godur, finance advisor and founder of Capital Max, said student loans and credit card debt can be daunting, but a strategic approach can ease the burden.
“Focus on paying off high-interest debt first while making minimum payments on others,” he said. “Consolidation or refinancing might also be viable options to reduce interest rates and simplify payments. By implementing these strategies, you can build a solid financial foundation for the future.
“Remember, financial planning is a journey, not a destination. Stay informed, stay disciplined and seek professional advice when needed. Let’s navigate this path together to secure your financial success.”
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