Yahoo Finance What They Didn't Teach You in Class: 4 Key Money Tips for College Grads
It's that time of year again -- college seniors are finally celebrating the end of a four-year trek through undergraduate school. After spending more than half of their lives in school, it's now up to each graduate to know how to properly manage their money and balance their budgets as they navigate their first "big kid" job.
[See: 11 Expenses Destroying Your Budget.]
To the new graduates: congratulations! But don't celebrate too hard yet. There's still some stuff about the real world you should know before you blow through your first paycheck. Sure, college classes taught you about biology and calculus, but here are four things your professors didn't teach you about managing your adult finances.
1. Find a Budget and Commit to It
You've probably heard this from everyone, but it bears repeating. When you first get your paycheck, sit down and figure out how much of it will go toward a savings account, how much goes toward rent and food, and what percentage will be "fun money." It's not going to be easy transitioning to a tight budget, but if you can stick to a budget, you'll form good financial habits that will serve you well through life.
If you have a higher-than-average paycheck, don't assume that means you can waste more of it on fun activities. Break down your monthly finances and remember to prioritize debt like student loans over anything else. Before you graduate, consider putting yourself on a practice budget while you're still receiving help from either your parents or financial aid. Stay cognizant of how much you are spending and see where you may need to cut costs when you do start to live off of your own paycheck.
[See: 12 Ways to Be a More Mindful Spender.]
2. Prioritize Your Debt
American students owe over 1 trillion dollars in student loans spread across more than 40 million borrowers. That's an obscene number that is only going to continue growing year over year. If you're one of the many borrowers, prioritize paying off your student loans above everything else, so you aren't stuck paying for the rest of your life. As tough as it may be with your current working budget, try to pay off loans with the highest interest rate first and then work your way down from there. Oftentimes students will try and wait until they're making more money to pay off their loans, but this can be much more costly for you in the future. Depending on your income, create a three- to five-year plan for your college loans so you know how much you'll need to save each year to pay off more and more of your student debt.
If you struggle to meet your payments regularly, you may want to look into different payment plans for federal student loans. Other options include income-based repayment plans, deferment options or even forbearance. Keep in mind: These payment plans will depend on your current employment situation and whether you decide to go back to school.
[See: 10 Easy Ways to Pay Off Debt.]
3. Start Saving
If your employer offers a 401(k) plan, it's really in your best interest to invest a portion of your paycheck into a retirement savings account. Traditional 401(k) plans allow you to save and invest your paycheck pre-taxes, so choosing to turn down an employer-sponsored plan is like turning down free money. Or you may choose to open up a Roth IRA, which is an individual retirement account that lets you invest up to a certain amount every year. Look for ways to automate your savings, whether it be through a traditional retirement plan or through a convenient mobile app that automatically puts away a portion of your income every week. Compounding interest is your friend. Use it wisely.
Having a good time doesn't mean draining your bank account. You can easily find activities to keep you occupied during your days off, even if you're living on a tight budget. Cut back on eating out and learn how to cook; take advantage of happy hour specials or free drinks at work. If going out is on your agenda, looking up happy hour specials can save you a considerable amount of money. Additionally, try cutting the cable cord and look into streaming services like Netflix or Playstation Vue. When you're living on your own, every cent counts, especially as you balance out credit card bills and student debt.
Budgeting in a post-college world can be stressful, but there are a variety of free resources that can help guide smart decision-making as you start collecting your own paychecks. Start small and plan ahead. As you enter the real world, stay cognizant of your personal income and how much your living expenses are actually costing you.
Josh Felber, a serial entrepreneur and high performance coach, focuses on helping people design, develop and deliver their passion and expertise to the world so they can have the time, freedom and lifestyle they want. He has co-authored two best-selling books, one with Brian Tracy and another with Steve Forbes. Josh is an Emmy award-winning executive producer of "Visioneer: The Peter Diamandis Story" and "The Rebound," a documentary on the Miami Heat wheelchair basketball team. Josh has appeared as a guest expert on NBC, CBS, ABC and Fox, and his biography was picked up by the E channel. He is a contributor to Entrepreneur.com, Inc.com, Businessinsider.com and Forbes.com. Learn more at joshfelber.com.
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