5 Personal Finance Tips for New Graduates

 

When graduates leave college, they’re faced with multiple financial decisions like finding an apartment or buying a new car. Without proper planning, you might develop bad spending habits, squander your salary, and accrue debt. Focusing on your finances right from graduation allows you to make wise financial decisions while investing in your future. Here are five personal finance tips for new graduates.

1. Establish a strong credit history

Your credit plays a crucial role in most of your life’s financial aspects, and it can affect you negatively or positively. It impacts your approval for car loans, mortgages, interest rates, and other loan types. Try paying your bills on time to build a solid credit score history and maintain it at its highest. Check your credit reports regularly to ensure there aren’t any errors or mistakes. Be sure to check out this Canadian personal finance blog to understand your credit report and score and why you need a good credit score. You will also get to learn more on how to secure your financial future.  

2. Make a plan for your student loan

Most federal and student loans offer a six-month grace period after graduation. This window allows you enough time to find a job, assess your financial situation, and plan your monthly payments. Log into your student aid account to see the available repayment options if you have a federal loan.

Choosing the default alternative leads you to the 10-year standard repayment plan with the most significant monthly repayments and the lowest cumulative interest. There’s also the interest-driven repayment plan (IDR) with lower monthly payments and a longer repayment term. Choose IDR only if the standard amount is unaffordable or you’re looking forward to getting into the Public Service Loan Forgiveness program.

3. Create a budget and track your expenses

A budget is an excellent way to keep your expenses in check to ensure your bank account isn’t overdrawn and your credit card debt doesn’t accumulate. This prevents you from living beyond your means and saving more. Include your debts, savings, and, if possible, investments in your budget.

If you’re inexperienced in budget preparation, research to get an idea, then use budget templates to plan your finances. Track your expenses to ensure you know where your money goes. This allows you to identify the areas of your spending that need improvement to increase your savings.

4. Develop an emergency fund

An emergency fund cushions you financially to prevent you from sinking into credit card debt or eating into your savings should a financial crisis arise. It covers unexpected expenses, including medical costs and job loss. Ensure that your emergency fund can cover your expenses for at least three months in the event of a crisis. Cutting down on non-essentials can help you build your emergency fund much faster.

5. Start investing for your retirement

It’s never too early to start investing in your future. After accumulating substantial savings, consider investing part of it in bonds, stocks, business, and other avenues for higher returns. Remember that investing involves risks, so prepare for that.

Endnote

New graduates have a lot to learn about managing their finances. Use these personal finance tips for fresh graduates to manage their money better.  

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