Financial Tips for New Graduates

Graduating from college or university is a big milestone. It’s also often the first time a person is fully responsible for managing their own money. When you graduate, you likely get your first serious job and start having to spend money on bills, living expenses, and much more. Even if you worked or paid your own bills while you were in school, graduating still means a big step into the “real world.” You’ll be faced with many new financial commitments and responsibilities and that can be tough to deal with.

A budget is crucial for everyone. If you’ve never made a budget before, this is the time to start. Begin by figuring out how much you earn every month after taxes. Only count the money that you know you’re going to receive (this means don’t include bonuses or tips or anything you can’t count on). If you earn an irregular income (such as if you work different shifts each week or do contract or freelance work), it’s a good idea to figure out the average income you expect to receive in a month. This can help you make a realistic budget.

Once you know how much you earn, you need to determine how much you spend. Expenses are usually broken down into two categories: fixed and variable. Fixed expenses are ones that you can’t change much each month, such as your rent, your car payments, etc. Variable expenses are almost everything else. When you’re just starting out, you’ll need to estimate your variable expenses. You can go back and adjust your budget once you know the real numbers.

If you have any debts (such as student loans or credit card debt) add these payments to your budget as well.

The goal of your budget is to make sure you spend less than you earn every month.

Tracking your spending is a huge part of making your budget balance. It’s important for many reasons. First, it tells you how much you spend each month. As mentioned, when you’re making your budget, you’ll likely have to start by estimating how much you’ll spend on food, clothing, entertainment, etc. However, if you track your spending for a few months, you’ll soon get more accurate numbers that you can use in your budget.

Tracking your spending also helps you see where your money is going. You can use this information to see if you’re staying on budget, adjust your budget to make it more realistic, cut costs when necessary, and more.

It’s very easy to get into debt, but tough to get out. If you’re a new graduate, you likely have a lot of costs and expenses. However, try to avoid using credit cards, lines of credit, and other forms of debt to finance your lifestyle. Before you pay for anything on credit, be sure to have a plan for how you will pay it back in full.

Be careful about opening too many credit cards as well. Not only could this affect your credit score, but the more credit you have, the more tempted you’ll be to use it.

Come up with a strategy that will help you pay your bills on time. Missing payments hurts your credit score and often costs you money in the form of penalties and other charges. Add the due date for all your bills into your calendar and set up reminders so you don’t miss anything.

If you’re graduating with student loans, you’ll want to come up with a plan to pay them off. While many student loans have lower interest rates than other debts (such as credit card debt), it’s still important to pay back your student loans. The sooner you pay them off, the less you’ll pay in interest. Figure out what you need to pay each month and add it to your budget.

Even if you can only save a few dollars a month when you first graduate, saving a little bit is better than saving nothing. Life is unpredictable and emergencies happen. If your car breaks down or you lose your job, you’ll want to have some money set aside to help you.

Put an “emergency savings” category into your budget and don’t spend the money in your emergency fund on anything but actual emergencies.

A big part of money management is setting goals and coming up with a plan for how to achieve them. Everyone has different goals. Some people will want to save money to buy a home while others will focus on paying off student loans. Determine what’s important to you and come up with a plan for how to achieve your dreams.

No one has unlimited money and, when you’re a new graduate, you’re likely going to be stretched pretty thin financially. When you have goals, this helps you budget and determine where your money should go. If you have to make cuts to your spending to make everything balance, start by cutting your least important expenses. In most cases, these will be the expenses that don’t help you achieve your goals.