Top 8 Post-Graduation Budget Tips
The most essential know-how you need after donning the cap and gown is rarely taught -- how to create and manage a personal budget. According to the US Census Bureau, 53 percent of recent college graduates are either unemployed or underemployed. Even if you have a good paying job, life is expensive and you just might find your checking account gasping for air. Get started by checking out these eight post-graduation budgeting tips.
1. Get Your Finances in Order
You've got limited funds, so it's essential to know where they're all going. A well-crafted budget can help give that to you. Sign up for a free website like Mint, use Microsoft Excel, or write your budget out on paper. The format doesn't matter. The content does. After you've got it laid out in front of you, start making cuts. Get mobile coupons via smartphone apps, like Grocery IQ, to save on food. Cancel your landline telephone service if you don't need it. Request an in-home energy audit from your provider for suggestions on how to save money. There are hundreds of ways to reduce your monthly bills, so do your research and take action.
2. Resist the Urge for Personal Purchases
When it comes down to it, you don't need the Samsung Galaxy S5 or the latest Apple upgrade. Get by with what you have and you can save significant money. In the same vein, stick with your current wardrobe, cook your own meals, and forget about upgrading that plasma TV. There's going to be plenty of time for that sort of thing when you're more financially secure.
3. Eliminate Credit Card Debt
If you have credit card debt, use your budget to calculate how much extra money you have available to put toward your balances each month. Create a long-term goal for paying them off entirely and set small milestones to celebrate along the way. If you should fall behind, simply readjust your goals and keep at it.
4. Start Saving for Retirement Now
Even if you only commit to investing $100 each month in an IRA, the long-term benefits are huge. Let's say you're 25 years old and you put $1,200 in a Roth IRA every year. Based on an average 7% annual return, you'd have just under $250,000 by the time you reach 65. If you have access to a 401k plan, go for that option - it may even have a match program through which your employer invests a percentage of your own contribution.
5. Build or Improve Your Credit Score
The higher your credit score, the lower your interest rates on credit cards, mortgages, and even car insurance. Pay your monthly bills on time, reduce your credit card balances, and don't close any old credit cards just because you don't use them anymore. Break them out every few months for a few minor purchases so the issuer doesn't close them for you - having a high amount of available credit increases your score. To check your standing, use a free website like Credit Karma.
6. Begin an Emergency Fund
You never know when your computer is about to crash, your car might break down, or a medical issue arises. Start setting aside for those possibilities immediately. Your ultimate goal should be at least six months worth of living expenses, but starting off by diverting even $50 per paycheck into a separate account is going to do you a world of good.
7. Investigate Student Loan Repayment Programs
The government recently created two different student loan repayment programs which can help lower your monthly payment (although they do extend your loan term). One is called the Income-Based Repayment Program, and the other is the Pay As You Earn Plan. If you happen to work in the field of public service, be sure to check out the Public Service Loan Forgiveness Program as well.
8. Consider Living with Your Folks
If haven’t left the comfort of mom and dad's home, you might want to stay put for a bit. Or, if you're on your own and struggling, a move back home could help you get back on your feet. According to the Pew Research Center, 29% of those in the 25-to-34 age range did just this in 2011. Just be sure to earn your keep and contribute as much financially as you can afford.
Part of being a college graduate means taking responsibility for yourself and your finances -- true responsibility. Your family might offer some advice, but ultimately, how you choose to manage your finances depends solely on you. Start budgeting more effectively today and you can reap the benefits for years to come.
What other ways could you better manage your finances?
Written by Daniel Nelson
Daniel is a college grad who writes about money management, budgeting, technology, and education.