So, you have earned your degree and are ready to embark on the next chapter of your life. Managing your finances effectively is the key for long term stability and success. Here are some golden rules for navigate your finance after graduation.
- Identify your current financial situation
First thins is very important if you’re going to manage your finance this is the most important step. Take stock of your income, expenses, student loans, savings and any other financial obligations you may have. This will help you to create clear picture of your cash flow.
- Create a realistic budget
Your budget must be realistic otherwise this step will not possible. It’s easy to say that you will save more than 50% your income but it’s not realistic. You can start with figuring out your non-negotiable costs and negotiable costs. Rent, groceries, bill payments are some of non-negotiable costs. As a negotiable cost we can hose dining out, clothing, parties.
- Debt management
Financial stability depends on effective debt management, particularly for recent graduates who have credit card debt and student loan debt.
Know the terms of student loans, including interest rates and choices for repayment. Options for postponement, forbearance, or income-driven repayment programs may be available with federal loans. Refinancing alternatives to reduce your interest rate may be available with private lenders. If paying more can help reduce the debt faster, think about doing so.
Debt from credit cards: Each month, pay off your credit card debt in full to avoid incurring hefty interest fees. If you already have debt, use the avalanche approach (pay off the cards with the highest interest rates first) or the snowball method (start with the smallest sums) to get things moving. Maintain a credit card utilization ratio of less than 30% while using credit cards sensibly to raise your credit score.
- Planning For the future
Your financial future can be greatly impacted by early savings and investment.
Retirement Savings: If your business offers a 401(k), contribute to it. This is especially beneficial if they match your contributions, which is effectively free money. If not, you might choose to open a Roth or Traditional IRA. Compound interest allows even tiny, consistent contributions to increase dramatically over time.
Investing: Get started now to benefit from compound interest. To reduce risk, maintain a diversified portfolio consisting of stocks, bonds, and other assets. If you want wide market exposure, think about investing in inexpensive index funds or exchange-traded funds (ETFs). Recognize your investing horizon and risk tolerance.
- Increase your income
Increasing your income can make it easier to control spending and preserve money.
Side Jobs: To augment your income, think about taking on part-time jobs like pet sitting, tutoring, freelancing, or tutoring. Opportunities can be found with the aid of websites like Upwork, Fiverr, or local classified ads.
Salary Bargaining: Do your homework on industry norms and be ready to bargain for a higher pay and better benefits at work. To obtain information, use websites such as PayScale or Glassdoor. During the bargaining process, emphasize your accomplishments and the value you contribute to the organization.
- Educating yourself
You may make wiser financial decisions by increasing your financial literacy.
Read and Learn: Great resources include “Your Money or Your Life” by Vicki Robin, “The Total Money Makeover” by Dave Ramsey, and “Rich Dad Poor Dad” by Robert Kiyosaki. Online classes offered by companies like Coursera, Udemy, or Khan Academy can also be a great source of knowledge.
Expert Advice: Speaking with a financial advisor can help you develop a financial strategy that is specific to your objectives and offer specialized guidance. Seek out a fee-only advisor who truly cares about you.
- Protecting your financial future
It’s critical to protect your identity and assets.
Insurance: Make sure you have enough auto, health, and homeowners’ or renters’ insurance. To get the greatest coverage for your needs and budget, compare policies. If you have dependents, life insurance might also be essential.
Identity Theft Protection: Keep a close eye on your credit report (you can obtain a free copy from each of the three main credit agencies each year), and if needed, take into account identity theft protection services. Be careful with your personal information and create strong, one-of-a-kind passwords for all of your accounts.
Conclusion
After graduation, managing finances demands meticulous preparation and self-discipline. You can attain financial stability and create a secure future by making a budget, setting aside money for emergencies, managing debt, saving for the future, reducing unnecessary spending, raising your income, educating yourself, safeguarding your financial future, exercising discipline, and establishing reasonable goals.
References
NSHSS (2022), 5 Ways to Become Financially Responsible After Graduation. Available at: https://www.nshss.org/resources/blog/blog-posts/5-ways-to-become-financially-responsible-after-graduation/
Take Charge America Team (n.d.), Financial Responsibilities for High School Graduates. Available at: https://www.takechargeamerica.org/financial-responsibilities-for-high-school-graduates/
Article by: Pasindu Liyanage (1st Year)