In any given year, around 2 million people wrap up a bachelor’s degree and graduate. For most, this starts an intensive period of job searching that last from a few months to half a year. Once a recent grad locks down a job, though, it’s typically the time when they move out of their parent’s home permanently. Unfortunately, many grads have shaky financial skills. If you’re verging about moving out and becoming wholly responsible for your financial well-being, keep reading for some key tips on handling those things the smart way.
Understand the Cost of Living
The cost of living varies quite a bit from location to location. For example, a studio apartment in Los Angeles might run you $3000 a month in rent. You might only pay half that much for similar Uptown Minneapolis apartments. Then, there are things like utilities, car insurance, entertainment, and food.
Plus, payments on those student loans will come due before you know it. You need a clear sense of what it will cost you to live somewhere to make smart financial decisions for yourself and your future. That LA job might sound glamorous, but it’s a bad financial decision if it will soak up your entire salary.
Make a Budget
Something else a lot of recent grads never really worried a lot about is making a budget. Far too many people graduate college having never made a budget outside of a classroom project. There are several common budgeting approaches to pick from, such as:
- The 50/30/20 Budget
- The Envelope Budget
- The Pay Yourself First Budget
- The Zero-Based Budget
Each budgeting approach takes a different tack, but they all provide you with a way to deal with the essentials. The essentials include paying your bills on time, saving money, and investing for the future.
Keep Your Debt Down
Once you get your first decent-paying job, credit card offers will fly through the door. You’ll find the prospect of a new car alluring. New clothes, electronics, and ever-nicer housing options will call out to you.
In other words, you’ll have a lot of opportunities to take on debt. Resist the urge.
While it makes sense to have one or two credit cards for carefully planned purchases and emergencies, don’t make a habit of using them. Look for cards that offer you benefits beyond a mere credit line.
If you like traveling, find a card that gets you deals on travel-related purchases like car rentals or hotels. If you mostly stay at home, look for cards that reward everyday purchases like gas or groceries.
Keeping your total debt down now will make your life much easier later when you want to do things like buying a house.
Invest in Your Retirement
A lot of businesses offer employees an option to invest in a 401k program or something similar. Take advantage of that program. In addition to managing the program, many companies will offer matching contributions to your retirement fund.
Beyond the taxes you’ll pay on it, those matching contributions are free money you get just for working somewhere. There aren’t a lot of times in life that you’ll get money for nothing where it’s legal. Passing up that opportunity will cost you way more than you’ll get from hanging on to that 3 percent contribution each paycheck.
Starting early on contributions to your retirement plan also lets you rack up years, even decades worth of extra growth. It can mean the difference between a survivable retirement and a comfortable retirement.
Check Your Credit Reports
You should check your credit reports every year. You can do it for free. It’s a good way for you to understand your total debts.
Plus, sometimes things get assigned to you on your credit reports that aren’t true. Getting those things off your credit report will help keep your credit score in the excellent range.
Moving Out and Handling Your Finances
Moving out for the first time and taking control of your financial destiny can feel exciting, but there are a lot of traps waiting for you. Make sure you understand the cost of living before you take a job far from home. Build a budget to monitor your finances. Limit your consumer debt. Invest in your retirement now, so you can take it easy later. Don’t forget to monitor your credit reports. You can fix problems you didn’t even know existed that way.
