Financial Tips for Recent College Grads
When the excitement of college graduation fades and the next chapter of your life begins, it's smart to spend some time figuring out how to best manage your finances. Your life is changing; your spending and saving habits are likely to change, too. The following tips are designed to help you take control of your finances confidently and competently. Building good money-managing habits now will serve you throughout your life!
Fine-tune your budget
The budget that will work for you today is likely to look much different from the one that got you through college. Take some time to really think about your short- and long-term financial goals and then create a budget that helps you achieve them. Be sure to include savings and student debt repayment in addition to your rent or mortgage payments, utilities and other living expenses, plus credit card payments and any other debts you may owe.
Review the terms of your checking account
If you've been using a student checking account, be sure you understand which features may change now that you've graduated. Student checking accounts typically waive minimum balance requirements and offer reduced or waived fees — e.g., ATM and monthly service fees — as long as you are a student or until you reach a certain age (often 25). Upon graduation, or when you reach that age threshold, the financial institution may automatically convert your account into a regular checking account, meaning you could be subject to monthly maintenance fees, minimum balance requirements, ATM fees, etc. if you stay with that product.
It's a good time to shop around to see which financial institution offers your ideal checking account. Some people find that a free checking account suits their needs, while others prefer accounts with perks — earning interest on balances, for example. Dollar Bank's Everything Checking, Free Checking and No Overdraft Checking provide a range of features and benefits so that individuals can choose the account that helps them achieve their unique financial goals.
Make a plan for repaying your student loan debt
If you took out student loans to help pay for college, then it's time to plan how you'll pay those off. Start by identifying all of your loans and their servicers, and review the repayment terms of each loan. Add the total outstanding debt, as well as the monthly payments, so you have a good understanding of your overall financial commitment.
Next, create a repayment strategy. If you're able to pay more than the minimum monthly payments, consider targeting higher-interest debt with any additional dollars to save on interest charges over the long run. Student loans typically don't carry a penalty for prepayment, so feel free to put more toward your principal each month to pay them off faster. You also might consider consolidating and refinancing your student loan debt so you have just one monthly payment.
If instead you find that the monthly payments will be unwieldy based on your income and budget, you have options. For federal student loans, the Federal Student Aid office of the U.S. Department of Education offers a variety of repayment plans, including income-based plans that limit payments to a percentage of income. If you have private loans, you may have the option of refinancing your loan(s) to make your monthly payments more manageable.
Get serious about saving
There's a lot to be said for having money tucked away, whether for a rainy day, a down payment on a home, a comfortable lifestyle or longer-term plans, such as retirement. Dollar Bank offers a variety of savings accounts to help you meet your financial goals. Empower yourself by becoming a dedicated saver. Here are some places to start:
Establish an emergency fund. Keep at least three to six months worth of living expenses stashed in a savings account that earns you interest while being easily accessible in case of unexpected costs — emergency home or car repairs, medical expenses, job loss, etc. Be sure to replace those funds any time you tap into them to ensure you always have a safety net.
Sign on to your employer's 401(k) plan. Retirement may be the last thing on your mind as your just beginning your career, but it's much easier to reach your goals when you start investing early. Plus, some employers offer to match the funds you invest in your 401(k) up to specified percentage, which can accelerate your savings efforts. Commit to investing the full percentage that's eligible for matching so you get as much of that free money as possible.
Automate your savings. Financial experts have long offered this advice: Pay yourself first. In other words, earmark a certain amount out of each paycheck for savings and have your bank automatically direct it to your savings account before you even see it. You won't be tempted to spend money you don't have!
Build your credit score and history
You probably discovered in college the importance of having a strong credit score. Your score, which reflects how responsibly you manage money, helps businesses and financial institutions assess your creditworthiness, set your credit limits and establish your borrowing terms. If you rented an apartment in college, your landlord likely checked your credit score before granting your lease. Likewise, if you applied for a car loan or private student loan, your credit score undoubtedly came into play.
Now it's time to look at your credit through a longer-term lens. You have the opportunity to set the foundation for a strong credit history — one that reflects years and, ultimately, decades of timely payments and responsible use of credit. How do you build your credit history? Make all loan, credit card and other payments on time, every time, paying at least the minimum balance; don't let credit card debt accumulate; and apply for credit sparingly.
You can fine-tune your credit-building skills by signing up with a free online credit monitoring service to see the impact various activities have on your credit score and history. You can also get one free credit report every 12 months from each of the three reporting agencies (Experian, Equifax and TransUnion) at annualcreditreport.com or 1-877-322-8228.
Visit Be Dollar Wise often for resources and more tips on managing your money and achieving your financial goals.
This article is for general information purposes only and is not intended to provide legal, tax, accounting or financial advice. Any reliance on the information herein is solely and exclusively at your own risk and you are urged to do your own independent research. To the extent information herein references an outside resource or Internet site, Dollar Bank is not responsible for information, products or services obtained from outside sources and Dollar Bank will not be liable for any damages that may result from your access to outside resources. As always, please consult your own counsel, accountant, or other advisor regarding your specific situation.
Posted: August 07, 2023