Personal finance tips for recent graduates

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Recent graduates face new financial challenges, along with determining future financial goals they want to accomplish. Fortunately, there are some relatively simple steps they can take to get started on the right track with their personal finances. 

Create a budget
An easy way to maintain control of your finances is to create a budget. Ideally, a budget will assist you in making sure you are spending less than you earn.

To create a budget, identify your current monthly income and expenses. Income includes your regular salary and wages, along with other types of income such as dividends and interest.

Divide your expenses into two categories: fixed and discretionary. Fixed expenses include necessities, such as rent, transportation, and student loan payments. Discretionary expenses include extras, such as entertainment, vacations, and hobbies. Include out-of-pattern expenses (e.g., holiday gifts, auto repair bills) in your budget as well.

The most important part of budgeting is sticking to it. To help stay on track:

  • Make budgeting a part of your daily routine
  • Build the occasional reward into your budget (e.g., splurge on a latte or have dinner at a restaurant)
  • Evaluate and monitor your budget regularly and adjust as needed

Make saving a priority
Whether it’s setting enough aside on a regular basis to accumulate an emergency cash reserve or putting money into an employer-sponsored retirement plan, make saving a priority. By starting early in your adult life, your money has more time to potentially grow and take advantage of the value of compound interest. To make it easier to save, arrange for a portion of your paycheck to be directly deposited into a savings or investment account.

Get a handle on your debt

  • Keep track of loan balances and interest rates
  • Develop a plan to manage your payments and avoid late fees
  • Pay off high interest debt first or take advantage of debt consolidation/refinancing

Understand the importance of having good credit
Credit reports affect a number of aspects of your financial situation. Having a good credit report will allow you to obtain credit when you need it, often at a lower interest rate. As a result, it’s important to establish and maintain a good credit history by avoiding late payments on existing loans and eliminating unpaid debts. Finally, it’s important to monitor your credit report on a regular basis for possible errors.

Evaluate your insurance needs
Having the right amount of insurance to protect yourself against possible losses is an important part of any financial plan. Your insurance needs will depend on your individual circumstances. Under the Affordable Care Act, everyone, regardless of age, must have qualifying health insurance or risk paying a penalty. If you don’t have access to health insurance through your parents’ health plan, an employer, or a government-sponsored health plan, you may purchase an individual health plan through either the federal or a state-based health insurance Exchange Marketplace. Visit www.healthcare.gov for more information.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016.

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