Smart Money Moves for Recent Grads
If you’ve recently graduated, first off: congratulations! Secondly, welcome to adulthood (sort of). Everyone has a different path after they’ve wrapped up their studies, so just remember that there is no need to compare yourself to anyone else because you are exactly where you’re meant to be.
Post-grad is filled with a lot of questions and gray areas. There is a lot to figure out in what feels like a short amount of time. One of the best things you can do for your future self after graduating is to put a money management plan in place. This can feel overwhelming at first, but being in control of your finances is a great way to feel like you’re officially “adulting.”
Whether you’re ready to jump into the workforce or you’re planning to continue your education, there is never a better time than now to start planning for the future. We’ve got you covered with some of the best money moves you can make as a recent grad.
Plan for the In-Between
First, there are a few important questions to ask yourself before walking across that stage. Now is the time to decide if you want to dive straight into the workplace or continue your education. Both are great options that come with their own pros and cons. Going into higher education most likely means that there are some student loans in your future, but aiming for a job out of college may take longer than you expect.
If you don’t have a job lined up and are feeling a bit lost, you’re not alone: according to this 2017 study from Student Voices, over 67% of graduating college students had not secured a full-time job by their graduation day. It can take time to find the right fit post-grad and take the first step in your career, so be patient with yourself. It also doesn’t hurt to plan ahead for that “in-between” time and ask yourself, “How will I financially support myself after graduation?”
Everyone has a different financial situation. For some, moving home for a while until they land a job is the next best step. If you’re struggling to land a 9-5 job and cannot receive financial help from your family, you can start by seeking out part-time work in the retail or food industries while you keep interviewing for full-time positions. Or, you can file for unemployment benefits if you’ve had some sort of paid work in the past year.
Manage Your Loans
Getting a degree is not cheap, but it does pay off in the long run—that is, as long as you prepare in the present. If you’re choosing the higher education route, learning how to manage your student debt is an amazing skill to have.
Here are a few steps you can take to keep your loans in control and pay off your debt.
1. Calculate the total amount of debt that you are facing
2. Know the terms of your loan inside and out. Different loans can have different interest rates, fees, and penalties.
3. Familiarize yourself with the grace period for your loans, as they can start at different times post-grad.
4. Use the avalanche method by paying off your loans with the highest interest rates first, and then work your way down.
5. Pay off principal whenever you can. This will help bring down your interest rates because interest is based on each month’s principal balance.
6. Set up automatic payments so that you are always chipping away at your debt. Some lenders even offer a discounted interest rate for this!
Plan Your Post-Grad Housing
As we mentioned earlier, everyone is in a different situation post-grad, job-wise and housing-wise. Some choose to move home with family for a while to save up and make sure they can afford to live on their own, while others move from dorm living straight to the apartment life.
There is no denying that living on campus next door to some of your best friends is an extremely fun and convenient setup, but it is (sadly) temporary. Post-grad you will most likely not be living a few feet away from all of your closest friends, and considering your next housing step is crucial to the transition process. Whether you’re on the job hunt or grad school grind, it’s important to take a number factors into consideration when it comes to housing, such as:
- Your location
- Your cost of living
- Your expenses
- Your personal preferences
- Your debt
In terms of how much you should be paying in rent, a good standard to start off with is the 50/30/20 rule which breaks down your income into three parts. Fifty percent of your budget should be dedicated to your needs, thirty percent to your wants, and twenty percent to your savings and debt payments.
It’s important to keep this breakdown and your overall cost of living in mind when you are searching for your first job so you can think practically in terms of what career path can support your lifestyle, now and in the future.
Budgeting is a muscle that you have to train. No one is born a perfect budgeter and it takes practice and consistency to really get the hang of it—but it is an essential skill to cultivate after graduating.
You can start with a monthly budget and then break it down daily. Here are some steps you can take to begin your budgeting journey:
1. Start by evaluating where you’re currently at financially, taking into account any outstanding debts and what’s in your savings and checking accounts.
2. Find the right budget to match your lifestyle and preferences. There are apps like Mint or Excel spreadsheet templates that offer tons of options.
3. Spend time putting all the pieces together and breaking your budget down into three main categories: income, expenses, and savings. You can get into the details of each high-level category from there!
When you’re at the point in your budgeting process where you want to create and manage your daily expenses, you can turn to buy now, pay later apps like Zip. With the Zip app you can split most purchases, payments, or expenses into four. Having your payments spread out over a longer period of time can help you avoid taking large amounts of money out of your bank account at once.
Invest in Your Future
Finally, a major secret to long-term financial stability is to start thinking about your retirement now. It may feel like a lifetime away, but your future self will be very happy that you started investing as soon as possible. This is another area of post-grad life that can feel very confusing and overwhelming, so start with the basics.
- Take into consideration the retirement benefits provided with any new role. If there is a workplace retirement account available, try to choose the Roth 401(k) option which allows you to pay the taxes off now.
- Match your employer’s 401k contribution to the maximum. As this Ellevest article states, this is “basically a guaranteed return on your money.”
- Start investing in small ways. You can use apps like Acorns to start investing in the stock market by simply rounding up your purchases to the nearest dollar. That is spare change put to good use!
With all this advice in your back pocket, you can do no wrong in your post-grad life. It’s a big and somewhat scary step, but it is so worth it in the long run to take control of your finances now. We have no doubt you’ll ace it!
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Zip’s editorial content is not written by a financial advisor. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.