While a good bit is definitely learned in college, unless finance or business was the main course of study, recent grads may need a little help when it comes to how to manage money, approach credit, and remain as debt-free as possible.
Here are five financial tips for those who have recently graduated to help make the most of available income and resources for a bright financial future.
Keep Track of Spending
It may sound like a no-brainer, but the first step in gaining financial freedom is to ensure that your income exceeds your expenses at all times. Creating a budget and keeping track of all expenditures from rent to your daily lunch expense will allow a clear picture of exactly how money is being spent and what changes may be needed to stay on track or to save to purchase a home or condominium.
Understand Income Taxes
Everyone who is employed should completely understand how income taxes work. It is important to know that the salary quoted by an employer will be gross pay, and the take-home paycheck, or net pay, will be minus income taxes and other deductions like social security. For instance, a yearly salary of $35k will really only be around $27.5k after taxes. Due to this, it is important to know that this salary will cover all monthly expenses.
It’s Never Too Early to Save for Retirement
Investing now will offer a substantial retirement fund in the future. Saving for retirement at a young age allows literally a lifetime of saving to live off of when you stop working. Choose company-sponsored retirement plans for a way to start investing now. Also consider an IRA if employee sponsored plans are not available.
Create an Emergency Account
No matter what expenses and financial obligations need to be met, be sure to put some money aside for an emergency account. Even if money is tight, savvy college grads know that having a nest egg to fall back on is crucial for life’s unexpected ups and downs. If you include payments to a savings account as a monthly expense, soon there will be enough money saved to bail you out of an emergency, retire and stop working, uses as a down payment on a home purchase, and more.
Control Your Spending
The key to success with finances is learning to only buy what can be currently afforded. Instead of maxing out a credit card for instant gratification, it is so much smarter to save and wait until the money is available to spend. Paying high interest on purchases is not a good move for anyone, especially those just starting out.
Gaining control of finances and investments now will help build a secure financial future that can provide for a stress-free life and enjoyable retirement. Learning how to handle finances now at such a young age will provide a lifetime of financial success.
