Once you’ve graduated from college and are working in your first professional job, managing your finances can seem like a minefield. While you’ve probably learned some of the basics of financial management while at college – such as making sure that you’ve got enough money left for food – adult life after graduation often comes with a whole lot more, such as paying separate bills, building a savings balance, thinking about investing your money, and everything else in between.
The good news is that you have plenty of time to figure it all out, and starting early, as you enter this next chapter of your life will help you avoid financial trouble further down the line.
Work Out Your Budget
A solid budget is at the heart of any good financial plan. If you want to manage your money better as you make the transition from student life to life as a full-time professional working adult, then the first step is to figure out exactly how much money you have coming in each month, and how much you need to spend on your living expenses.
Prioritize those expenses that you simply can’t get away without paying like your rent and utility bills and paying back any student loans you have, and then from what’s left over, figure out how much you’re going to spend on things like food and gas, new clothes, hobbies, entertainment, and anything else.
Set Money Aside
Whatever you want to save up for, the sooner you can get started, the better. Lots of young adults who graduate from the university will immediately start saving up for a down payment on a house so that they can become a homeowner and get out of the renting trap.
Whether or not you expect to get some financial help from parents or grandparents when it comes to buying your own home, it’s a good idea to start saving early so you can contribute more and make sure that you’ve got enough for all the other expenses involved like legal fees, moving fees and buying new furniture. It’s a good idea to include savings as an expense in your budget and set aside a set amount each month that will build up over time.
Invest Your Money
As you start saving, you might want to consider building your wealth with some long-term investments like dividend stocks. Spending some time learning about investments and choosing low-risk options is a good place to start. You can use a dividend calculator to get a better idea of how much you could earn from investing.
Reduce Debt and Build Credit
As you graduate college and start your adult life, it’s a good idea to focus on building a strong credit record as this will improve your chance of being accepted for any financial products that you might need in the future such as a mortgage or a personal loan.
Reducing any debt that you are in is one of the best ways to do this; you can use several methods to pay off your debts faster such as the debt snowball method, where you pay as much as you can to the smallest debt until it’s cleared, and then use your extra money to start paying off more on the next one up until you reach the largest and clear it.
If you’ve taken advantage of student overdraft facilities and credit cards in college, start working to clear or at least greatly reduce them now. If you’ve never taken out credit before, this can also impact your credit score, so consider getting a low-limit card and using it for essentials, before repaying the balance at the end of each month.
Graduating college and starting adult life can often be a financial shock. Keep these tips in mind for better money management as you start your life as a new professional.