Well, you finally did it. After years of hard work, you earned your degree. Now that you have your education, there is more to consider than just finding a job and paying off student loans. Although those are essential, you also need to start thinking about your financial future. It is a lot easier to start on solid ground financially and build your future while you are young than it is to try to repair or rebuild your finances later in life.
Make a Budget
Even though you may have taken a course or two in Economics that does not necessarily mean you have a solid plan to handle your own finances. It will make your life run a lot smoother if you give up the day-to-day spending habits that you might have gotten by on in college. Budget planning is not that difficult. You simply need to add up all your expenses and figure out how you are going to cover them with your income. If you have more expenses than income, then you need to either decrease your expenses or increase your income. This may mean making tough decisions like staying home on a Saturday night or taking on a second part-time job. However, like getting your degree, sound financial planning now will now pay off as you get older.
Build Your FICO Score
You may have no idea what a FICO score is, but trust me, it is very important. Your FICO score is your credit rating with the three major credit bureaus. Your FICO score plays a big role in whether or not you get approved to rent an apartment, what kind of interest rate you get on a car loan and everything else that requires good credit. It can even have a role in determining whether you get a particular job or not. One good way bump up your score is to pay off your credit card debt. Try getting a personal loan from an Internet lender like creditloan.com or a bank like WellsFargo and using that money to pay off your credit cards. However, this is only a good idea if you can get a loan at an interest rate that is lower than the rates on your credit cards.
Do Not Buy Everything at Once
Once you get your first good job, you might be in a hurry to accumulate many new things. This is a mistake for everyone, but especially for recent graduates who still have student loan debt to tackle. For example, there is a big difference between needing a new car and wanting one. You may want a new car, but why take on all that extra debt and get saddled with a huge monthly car payment when you can by with the car you have for a while longer. Your first apartment does not have to win any design awards either. Do not be afraid to accept donations from family and friends. Aunt Sally’s old couch may not be exactly to your taste, but it is a lot cheaper than buying a new one. The idea is to save as much as you can and spend as little as possible.
Pay More Than Expected
If you can, try to avoid making minimum payments on your credit cards. That includes your student loan payments as well. It may be tempting to save a little extra pocket money and only pay the minimum, but you will either pay now or pay later. Most people accumulate more debt as they move through life by buying a house, getting married, and possibly having kids. The more you can reduce your debt when you are young and single, the happier you will be when the really big bills like a mortgage payment starts rolling in. No one is suggesting that you have to stay home all the time and starve yourself to get out of debt, but it would not hurt to be a little frugal and prioritize your bills over your “funny money.”
It is not easy to be financially responsible right after you get out of college. After so many years or scrimping by while you were in school, you may feel like you owe it to yourself to splurge on all the things you want. No one is saying you cannot have the things you desire, but the best way to handle finances is in stages. The harder you work in the beginning, the easier it will be for you to buy the things as your financial shape improves over time.
Dona Collins is a personal finance specialist and writer. Her passion is to help others create a strong financial plan for a bright future.
