Article written by: Grace Spears
Photo Credit: Micheile Henderson via Unsplash
Fresh graduates need financial guidance, especially now that debt is likely to follow students well into their adult life. That's the key finding of Princeton University's Caitlin Zaloom, who conducted a study on how student debt is transforming American families. Zaloom found that most college students regardless of economic class incur debt just to get through college. This reality makes financial lessons all the more vital. Here are four of them for fresh graduates like you.
Set your finance-related priorities straight
It’s impossible to do everything — save up, repay debt, invest, and buy things — all at once. So, it's imperative that you make your own money priority list. In doing so, NerdWallet recommends that you prioritize in this order:
• Save $500 in a high-yield savings account for emergencies
• Contribute enough to your 401(k) to match your employer's
• Begin paying off debt, but start with high-interest ones first
• Save for retirement, using at least 15% of your pre-tax income
• Add to the emergency fund so it covers at least 3–6 months’ worth of expenses
Make budgeting a habit
To make your money priority list work, you’ll need to budget. Unfortunately, many young adults fail to do that consistently. A likely reason is that they are turned off by the notion of budgeting, mistakenly equating it to only to living within your means. But budgeting is more than that. It’s also about being prepared for anything that life throws at you financially. Having said that, you need to look at budgeting as creating a spending and saving guide so you can, in the future, buy the things you truly want. This change in mindset can help you embrace budgeting, and you can start by keeping track of all your expenses for a month. Then, keep only those that are necessary.
Meet with a financial planner
A financial planner can guide you in matters related to money that you will likely be unaware of. Personal finance reporter Hanna Horvath shared to Business Insider how employing a financial planner after college meant having a guiding hand in all things finance related. She explained how financial planners will show you how to create a budget and make investments so you can be financially independent as well as avoid the common debt pitfalls gradates fall into. The good news is that finding one won’t be that hard, as the number of financial planners has been steadily increasing to meet increased demand for professional money advice. Projections outlined on Maryville University show that the number of financial planners in the U.S. will increase by 30% by 2024. You can even avail of free consultations such as those provided by GreenPath, whose financial experts will assist you in navigating life's financial challenges.
Create other streams of income
You’re young, full of life, and at the height of your earning power. So, take advantage of this! Don’t just rely on the salary you’re getting, especially if you have just graduated. Instead, create other streams of income, which you can do by partaking in the gig economy. You can, for instance, do freelance work, or maybe even get a second job. Either way, though, don’t use earning extra as an excuse to spend more. Rather, use that additional income to add to your savings and retirement fund. Better yet, use a portion of it to invest, as it is another means to grow your funds. Investing, of course, is one of the things you'll learn if you do meet with a financial planner, as suggested. Once you get started, you can then peruse a range of online resources so you can get better at investing.
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