Congratulations! You’re a college graduate. If you’re like most graduates you have a lot of big decisions ahead of you: Where to live, which job offer to accept and how you are going to manage life after college. Your finances should also be on this list. After all – finances are a huge part of what it takes to flourish.
Solid money management strategies help you become more stable and will allow you to experience more out of life. Creating an organized money management approach you can reference when you have questions will give you more security and confidence.
The following tips will help you build a solid financial foundation for the present and your future.
Prioritize and pay off your loans ASAP
If you are an average graduate, it’s likely you have several loans. Staggeringly, the amount of debt accrued for an average college grad can range from $22,000 to $40,000.
A few ways to stay on track is to organize each of your loans by the minimum amount of repayment or by the interest rates. To do this you can either use the debt-snowball method or the debt avalanche method.
The debt-snowball method is a way to reduce your debt by paying off smaller debts, first. After each small debt is repaid, use the money you were paying on the smaller debts to pay down the next-smallest debt. The debt avalanche method has you paying on the highest interest loans first, to keep from paying more money in interest. Choose a method that makes the most sense for you.
As much as you’ll want to use any extra money for entertainment activities, do your best to apply the additional income towards your debt. The sooner you can pay off your loans, the sooner you can save, invest or spend your money. Don’t miss payments, either. Late fees add up very quickly.
Make a monthly plan and follow it closely
By now, you should be used to making a plan. Planning your route to classes, arranging your schedule and developing activities for your weekend were a great taste of formulating a strategy. Now, you can apply that knowledge toward making a plan for your money.
When you know how much money you have to spend on housing, food and other expenses each month, you have a clear picture of the income you need and where your money is going. Making a budget is only the first step. You need to evaluate your budget about every three to four months and adjust it according to any new developments in your cash flow. The fine-tuning process helps you remain focused on your financial goals. Read this article for more information on creating and sticking to a budget.
Save your credit score
An often overlooked aspect of money management is preserving and building your credit score.
Your credit score rating is a way for financial institutions to determine how much money to lend you and which interest rates you will receive. Request your credit report, which shows you the information credit rating companies use to determine your credit score. This information is a snapshot of your payment history, debts you owe and your public records.
It will benefit you to follow best practices for building your credit score, like paying your bills on time and lowering your credit card debt. If you can build a good score while you are younger, it will serve as a catalyst for spending less money in the future.
Fill your rainy day fund
Hopefully, you aren’t one of those people who think, “It won’t happen to me.” Health conditions, accidents, job loss and other emergencies happen more often than you think. And, they can happen faster than you are usually prepared for them to happen.
When you create your budget, make a category for emergency savings. Ideally, you should have about a year’s worth of living expenses saved, though six to eight months of savings will work. You can set up an auto-deposit into an emergency savings account so you can build a foundation without much extra work.
You have a lot to look forward to. Keeping your finances in order will go a long way in making your future a bright one. Taking care of your student loans, creating a budget, keeping tabs on your credit score and saving for emergencies will help you build a solid foundation for your money.
Our bankers at MidWestOne can help you get started. We can answer your questions and find solutions that make sense for your situation. Stop in to see us at any of our locations, or call us at 800-247-4418.