Your first year after graduating from college involves a lot of big changes. There’s a good chance your major responsibilities during the last four years consisted simply going to class and getting your homework done. Now that you’re out in the real world – with a full-time job, a few monthly bills, and less free time – you’re going to have to adjust to a new lifestyle.
Part of that involves making smart financial choices. Luckily, this doesn’t need to be as difficult and intimidating as you might think. By taking certain basic steps now, you’ll avoid a lot of financial stress in the future.
Recent graduates, keep the following points in mind. They’ll help you get your finances in order during this critical yet exciting time.
You may not need life insurance now, but if you have a car, odds are good your state will at least require you to obtain auto insurance. Another popular insurance type to keep in mind is health insurance: Your employer may provide you with health insurance, but if they don’t, you’ll want to purchase it.
Renters insurance is also very helpful. Even low-cost renters insurance protects you from theft, damage to your belongings, and similar problems. It can also provide financial compensation in circumstances where your place becomes uninhabitable.
This is always important, but it’s particularly important during this early stage of your career. You may rely on certain items, like a computer or phone, to get in touch with potential employers to set up interviews. On top of that, because you’re a recent graduate, odds are good you don’t have a lot of money saved; if your place were to suddenly become uninhabitable, you need to know you have access to compensation so you can find a new home quick.
Gather Your Documents
Having certain documents readily available makes many aspects of adult life much simpler. For example, if you apply for a passport or a marriage license, you’ll need both your birth certificate and your social security card.
However, there are other documents you may also need in the near future. Some you may not have considered. Planning on selling your car at some point? You’ll need the title. Keeping all of these documents in the same, secure place will save you a lot of time and headaches later on.
You might also consider scanning copies of them to store digitally. You want to make sure they’re stored in a secure drive, but having fast access to them can give you crucial peace of mind.
Decide On a Student Loan Payment Plan
Odds are good you’ll need to start paying your student loans back within six months of graduating unless you start pursuing another degree. That’s why it’s important to explore payment options now.
Standard plans typically involve 10-year terms at fixed payments amounts. Income-based plans can involve terms as long as 25 years, with payment amounts that vary from one year to the next. You may also consolidate loans with different interest rates from multiple years.
No route is perfect for everyone. Assess your financial situation and determine what seems best for you. The U.S. Department of Education offers to help.
Create a Budget
Thanks to apps and sites like Mint, creating a monthly budget has never been easier. There are numerous free resources available to people who’ve just graduated from college and need to track their spending closely.
The most important thing when budgeting is to be diligent. That small cup of coffee you grab on the way to work every now and then? Those types of costs add up. Including them in your budget helps you avoid running out of money for rent, bills, and savings.
Get a Credit Card
Yes, a credit card can lead to excessive spending. However, if you’re able to discipline yourself, it can be an essential tool for building your credit. This will be useful in the future, as a strong credit score helps you with everything from renting an apartment to applying for loans.
Save Money for Surprise Expenses
Unexpected bills are part of adult life. Whether you’re faced with a sudden medical emergency, your car breaks down, or you need to find new accommodations after a pipe burst at your apartment, having at least $1000 saved – the more, the better, though – makes life much less stressful.
Strange as it may seem to those who’ve just joined the workforce, now is also a good time to start planning for retirement. Investigate what types of accounts you think may best serve your needs. Your employer might offer a 401(k) plan, but if you’re a freelancer, a business owner, or simply someone who wants to maximize their savings when they retire, you may want to look into other options.
Again, while all this might seem overwhelming, it doesn’t have to be. By taking a few simple steps now, you’ll set yourself up for a bright financial future.
Brian is a dad, husband, and an IT professional by trade. A Personal Finance Blogger since 2013 who, with his family, has successfully paid off over $100K worth of consumer debt. I want my three children to handle money better than I ever did at a young age. I have been teaching them as much as I can for the last 10 years. My goal is to continue to champion the financial literacy message and then why I created the “How To Rock Your Money” book. To help teenagers navigate their financial futures. I hope my family’s story of paying off over $100,000 worth of debt will inspire and motivate you to take control of your money. He blogs at BrianBrandow.com