It’s graduation season, which means there are a lot of 22 year olds out there who are probably walking around completely freaked out about their personal finances now that they have to live in the “real world.” If they’re lucky and their parents let them return to the “nest” they may have a little reprieve before having to face it. But even then, they could use a little advice on how to get on the proper financial footing. Below is a great list of money advice compiled by the Personal Finance Cheat Sheet for those new grads out there. Feel free to pass along if you know anyone that may need it.
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1. Keep spending at a minimum
While it might be tempting to spend more money, especially if you just snagged a new job, it would be in your best interest to put a limit to spending before it gets out of control. Now is the time to practice good financial habits. There are plenty of budget trackers and online tools that can help you rein in your spending.
2. Save your money
Once you’ve mastered living below your means, it’s time to take that extra cash and put it away for a rainy day. If you don’t develop a solid financial plan, you could be just one emergency away from serious financial trouble. This is even more likely if you graduated with educational debt. Roughly 69% of graduating college seniors had student loan debt in 2013, according to a study by the Institute for College Access & Success. Their total average student loan debt was about $28,400.
3. Tune up your money management skills
Take this time to sharpen financial skills. When you start your first job, take a look at your employee benefits and review retirement accounts, health insurance, disability insurance, and any other benefits that will be available to you.
4. Don’t forget about your loans
You may want to relax a bit before starting your new life, but don’t relax too much. Make sure you don’t forget that your student loan payment will be due in just a few short months (in most cases, lenders give you a 6 month grace period). Failing to pay your loan in a timely manner could result in a negative mark on your credit report. If you are having difficulty meeting your monthly payments, there are several repayment options available. Call your lender as soon as you think you might not be able to pay your bill. The sooner you call, the sooner they can help.
5. Avoid “lifestyle inflation”
Don’t let a rise in your income tempt you to purchase a lifestyle to match. Many new grads go and rent a two bedroom, two-bath luxury apartment. They proceed to purchase “buy now, pay later” furniture for $4,000 to fill up that apartment. Some people even take on car payments and credit card debt in the six months leading up to student loan repayment. They max out their budget and haven’t even bought groceries yet! This behavior puts them into an endless cycle of deferment and default. It is okay to upgrade your life a little after graduation so that you are no longer eating Ramen noodles, but don’t stretch your financial life so thin that you never recover!