Soon after they’re graduated, the recent college graduates will develop their financial plans to make sure that they are well-prepared for all the twists and turns of the ‘real world’. This can be the first time lots of them are managing their finances on their own, as well as they cannot know where to start.
By following the below tips, new grads can prepare for a financially successful future in a better way:
Prioritize Your Goals
Speaking, there are 4 basic goals some people work toward. They save for retirement, an emergency, a major expense (like a vacation, home, and new car), and they pay down debt. Which goal is important to you more will depend on where you are in your life.
When you have graduated, you want to concentrate on saving for an emergency, saving for retirement, as well as repaying debts. Saving for the large things in life, such as a fun vacation and a home, can come later after you have knocked out your debt and have a considerable amount of money tucked away in the case.
If you are dealing with debt, concentrate on the loans with the high-interest rates first, such as credit card debts. Create minimum payments on any other debts.
Establish an Emergency Fund. See monthly income and multiply it by 6. That is the at least amount you need to eventually have in your emergency fund. This fund is meant to cover things such as a highly medical bill, car trouble, and to tide you over if you lose your job. You do not have to build the fund in record time begin by contributing what you can afford after essential expenses, retirement savings, as well as debt payments.
Begin Saving for Retirement
Even though retirement is decades away at this point, you need to start saving something now, either in an employer-sponsored plan and an individual retirement account (IRA). Contribute as much as you can each month, even if it is $10. It cannot look like much, but thanks to compound interest, $10 a month now may be worth more than $100 a month a decade from now.
No matter what goal you put first, you can shift priorities with time. For instance, you decide to pay down your credit card debt first, as well as put a specific amount of your income toward that debt every month. Once the cards are paid off, you can concentrate on a new goal, such as boosting your retirement savings and putting money aside for a down payment on a home.
Speaking with a financial planner is a great choice if you are not sure where to focus when it comes to financial goals. An advisor will show the ups and downs of focusing on paying off any debt quickly versus retirement savings.
Make a budget and start saving
Using your money responsibly is key to accomplishing your goals, as well as a budget makes that possible. Utilize your budget to assign every dollar a job and do not forget to include saving money towards your goals among those jobs. To make a budget, begin by tracking spending so you know where your money is being used. Look to spend cuts to free up cash for your goals and treat savings as a bill you pay along with rent and car payment so you allocate funds towards your goals before any unnecessary discretionary spending.
Consider refinancing your student loans
If you have student loan debt, repaying it’ll probably be one of your important financial goals. You want to understand what your payment options are, and the type of debt you have so you may develop a smart repayment plan. Federal student loans provide the borrower benefits including an option in repayment options, flexibility in changing your payment plan and pausing payment, and even the chance to get part of your loans forgiven under specific conditions. They have low fixed interest rates. Private student loans, on the other hand, do not offer all of these benefits and you can be stuck with debt at a high rate. If so, refinancing your student loans can help you to save on your monthly payment and become debt-free faster. With interest rates low right now, you can potentially realize important savings by refinancing if you are a well-qualified borrower and have a co-signer willing to guarantee your loans.
Work on your credit and Use credit cards as a tool
One benefit of student debt is consistent on-time payments will reflect positively on the credit. And a credit score in the high 600s and above is important to access the great rates on loans, insurance, and a mortgage. Most employers and landlords check credit, too. Check the credit report to see where you are standing. Chances are, you do not have much of a file. To start working on your score, apply for a secured credit card as well as a basic credit card at your bank. Having a credit card does not mean you have to carry a balance. Instead, that pay off your card on time each month and use less than 30 percent of your available credit. If your card limit is $3,000, for instance, limit your balance to $1,000 or less. As your credit improves, you will qualify for cards with more benefits like cashback, and points or miles.
Take benefit of tax breaks
Graduating and taking a real job means filing tax returns if you have not. The good news is, you have most choices for tax breaks if you invest in accounts such as a 401(k), IRA, and health savings account (HSA). These accounts can help you to invest in the future without reducing your taxable income as much, so begin contributing to them.
Become an investor
It is not sufficient to save for your future. You want to invest if you need to earn reasonable returns and build wealth. Most people do great by investing in index funds that track the performance of the market as these present fewer risks than choosing individual stocks. If you need to make investing easy, you can want to consider using a Robo-advisor that will invest your funds for you after you answer some simple questions about your investing timeline, goals, and risk tolerance.
College grads, need a personalized road-map for your financial future?
We hear you, college debt can be overwhelming!
Talk to our wealth management experts at YMA Wealth Management Group today! Not only will we help you with college debt, but we can also help you improve your credit score and get on track for your future goals.
May your future be bright! Congrats graduating.
Stay motivated give us a call today: 1-800-381-9206