If you’re a recent college graduate or about to graduate this year, there are several financial considerations to make that you didn’t have to think about while you were still in college. You should think about making money moves right now before you graduate from college. Now is the time to start thinking about your financial future.
Money Moves to Make Right After Graduating College
Although planning out your short and long-term financial situations may seem like a chore when you’re in the midst of writing essays and studying for tests, here are three extremely important things to consider for soon-to-be graduates.
Figure Out Student Loan Repayments
If you’re drowning in student loan debt after graduation, then your first priority should be getting on track to start paying off your loans. There are several options available for paying off your student loans, including income-based repayments for federal loans, refinancing your private student loans, and possibly even finding a job that will pay off your student loans for you.
Once you figure out how you can pay off your student loans, your next step is determining when you need to start (it’s usually not right away, but 4-6 months after finishing your credential or degree) and how much you should pay off.
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The federal government’s student loan website has a nifty student loan repayment calculator to help you determine how much money you should put towards your student loan balance each month. It can be advantageous to pay off more than your minimum payment because this will decrease the timeframe of the loan as well as save you tons of money on student loan interest.
It’s important to ignore student loan myths at this stage because many people get caught up in the frantic race to get rid of debt and sometimes fall into traps that may end up costing you money rather than saving money. Don’t be so quick to sign up with companies that promise to solve all of your debt problems; instead, follow the government-approved guidelines to figure out the best path to debt-free living after college.
Move Out on Your Own
If you’ve been living with your parents or in college dorms for most of your higher education experience, then it’s probably time to move out on your own. Planning carefully at this stage will prevent you from feeling overwhelmed by the whole experience of settling into a new job, paying off student loans, and starting out in the world on your own.
Unless you have a ton of money in the bank or a partner or spouse who owns a home, you will likely be a first-time renter, which comes along with its own set of benefits and pitfalls. To avoid stretching your budget too thin, personal finance experts agree that you shouldn’t use up more than a third of your income for rent.
So, if you’re making $3,000 per month after taxes through your first post-college job, you won’t want to spend more than $1,000 per month on rent and utilities. Spending $1,000 can be difficult in areas with a high cost of living, which means you might want to find a roommate to lower your monthly living expenses.
Don’t forget the importance of having a good credit history at this point in your life. Landlords often perform credit checks to determine the financial viability of potential renters, and your utility payments will also incrementally affect your credit history as well.
You might not want to be a renter forever, so try to devise a plan to save for a down payment while paying off student loans and minimizing your monthly rent by choosing no-frills housing until your career and income)takes off.
Start Investing Now!
Even if you’re still paying off student loans, investing is not only a possibility but a necessity to achieve upward financial mobility. Now that you’re not a broke college student living off of ramen noodles while spending every waking hour studying and writing essays, the time you spend working to make money should be reinvested so you can make your money work for you.
Investing can seem overwhelming at times especially when you’re dealing with a new job, new home, and student loan repayments. But, even if you weren’t a business or economics major in college, you should at least start saving for retirement until you feel comfortable diving into more serious investments.
One of the best ways for new investors to get started is with Betterment, which is a low-cost robo advisor designed to be a hands-off way for people to build wealth. Betterment offers a free mobile app, a variety of investment accounts – including IRA retirement accounts – and simple explanations for everything that they offer, which can be enormously helpful for any recent college graduate who feels apprehensive about investing.
Studies have shown that Millennials have very little saved for retirement, but you can be a step ahead of your peers by starting early. Although retirement might seem like a distant dream at this stage of your life, don’t let the 30-40 years of working fly by without a long-term strategy, even if you’re still paying off debt. The more money you invest now, the more interest that money will accrue over the next several years.
Graduating from college is an incredible achievement, and the road ahead will be easier than you might think as long as you plan ahead. Whether you just graduated or you’re about to graduate soon, there’s no better time than now to start figuring out when you’ll pay off your student loans, where you might want to live (and how much you’ll pay in monthly rent), and long-term goals such as saving for retirement.
By starting now, you’ll be well on your way to zero student loan debt and financial stability. Now is the time to start thinking about your financial future and the money moves that you will have to make right after graduating from college. Waiting until graduation may be too late.
What about you? Have you started thinking about the money moves you need to make before you graduate? Are they others I missed?