The end of your academic life is a time of major transition. As you enter the real world of working and supporting yourself, it's important you make the right financial decisions from the start to set yourself up for a more secure future.
To help you do that, follow these six personal finance tips to take control of your money management:
- Set financial goals ASAP
- Make a budget and start saving
- Consider refinancing your student loans
- Build up your credit score
- Take advantage of tax breaks
- Become an investor
1. Set financial goals ASAP
If you don't know what you hope to accomplish with your money, chances are you won't accomplish much. To make sure you're using your hard-earned dollars wisely, take the time after graduation to consider what's most important to you.
Ideally, you should set both long-term financial goals (such as saving enough for retirement by age 65) as well as mid-range and short-term goals (such as saving for a vacation next year or a house in five years). Be specific in both the amount of money you'll need to accomplish your goal as well as your desired timeline.
2. Make a budget and start saving
Using your money responsibly is key to accomplishing your goals, and a budget makes that possible. Use your budget to assign every dollar a job and don't forget to include saving money towards your goals among those jobs.
To create a budget, start by tracking spending so you know where your money is currently being used. Look for spending cuts to free up cash for your goals and treat savings as a bill you must pay along with your rent and car payment so you allocate funds towards your goals before any unnecessary discretionary spending.
3. Consider refinancing your student loans
If you have student loan debt, repaying it will likely be one of your key financial goals. You need to understand what your payment options are, as well as the type of debt you have so you can develop a smart repayment plan.
Federal student loans offer the borrower benefits including choice in repayment options, flexibility in changing your payment plan or pausing payment, and even the chance to get part of your loans forgiven under certain circumstances. They typically also have low fixed interest rates.
Private student loans, on the other hand, don't offer all of these benefits and you may be stuck with debt at a high rate. If so, refinancing your student loans could help you to save on your monthly payment and become debt-free faster. With interest rates very low right now, you could potentially realize significant savings by refinancing if you're a well-qualified borrower or have a cosigner willing to guarantee your loans.
To determine if refinancing could save you, visit Credible to compare student loan refinancing rates from multiple lenders at once without affecting your credit score.
If you find you can lower your rate, consider applying for a refinance loan ASAP to make your student loan debt cost you less. Again, Credible can help you find out what kind of student loan refinancing rates you qualify for today.
4. Build up your credit score
Good credit is the foundation of a solid financial life and you should start working on building credit as soon as possible. Opening a credit card may be the easiest way to do that as you can begin to establish a positive payment history and show you're using your card responsibly.
You can visit an online marketplace like Credible to find the right credit card for you that allows you to boost your score while potentially also earning generous rewards.
Alternatively, if you already have a lot of outstanding credit card debt because you borrowed while in school, your high balances may hurt your credit score. A debt consolidation loan could make it easier to repay your debt, while also showing lenders you can be responsible for paying both an installment loan and revolving debt.
You can visit Credible to compare rates and lenders and see if consolidating could save you money, help you become debt-free faster, and improve your credit score all at the same time.
5. Take advantage of tax breaks
Graduating and taking a real job means filing tax returns, if you haven't already. The good news is, you have some options for tax breaks if you invest in accounts such as a 401(k), IRA, or health savings account (HSA).
These accounts can help you to invest in your future without reducing your taxable income as much, so start contributing to them.
6. Become an investor
It's not enough to save for your future — you need to invest if you want to earn reasonable returns and build wealth. Many people do best by investing in index funds that track the performance of the market as these present less risk than selecting individual stocks. If you want to make investing really easy, you may also wish to consider using a robo-advisor that will invest your funds for you after you answer a few simple questions about your investing timeline, goals, and risk tolerance.