For new college graduates, it can be tough emotionally and financially to transition into a full-time career. Not to mention, there are so many new responsibilities that come, including finding and paying for a place to live on your own or contributing to a 401(k) plan for the first time. One of the hardest things many new graduates struggle with is figuring out how to budget their money. With other challenges to prepare for, we have put together our best budgeting tips to help with the transition.
- Create a Budget and Write Your Budget Down
One of the biggest mistakes you can make is not living by a budget. A close second is not having your budget documented where you can measure how you’re performing against it each month. With your new job, you’re now responsible for all your bills and making sure you put money aside for savings.
You can start with a simple budget, such as the 50/30/20 approach. This is where you spend 50% of your money on things you must pay for, such as monthly bills or rent. Then the next 30% of your salary can go to something you want, such as that morning latte or a vacation. The final 20% of your money can be spent on savings and debt, like if you have any student loans.
An easy way to keep track of your finances is with Money Manager, available to all Empeople members via Digital Banking at no charge. Allowing you to create budgets and savings strategies, track spending habits, set financial goals, monitor income and bills, and more, Money Manager is the best way to truly manage your finances.
- Create an Emergency Fund
Creating an emergency fund should be one of your top priorities with your new financial situation. When you’re young, it feels like you’re invincible, to a degree, but no one is immune to hard times. If, in the future, you get laid off or lose your job unexpectedly, then you’ll want some money to fall back on to help you get through. Saving 3-6 months’ worth of expenses can help you feel comfortable being prepared to face anything coming your way.
- Start Investing
The earlier you invest, the better off you’ll be later on. Your employer might have a retirement plan program, such as a 401(k) with a match.
By not investing, you could be missing out on free dollars to go toward your retirement. It’s never too early to start saving for your retirement as more and more people are reaching that age without enough to sustain them through their retirement.
- Consider Living with Your Parents
This might not be what you want to hear, but you could save a lot of money working remotely or in the town where your parents live. Either renting out a room in their house or just living with them can help you save a lot of money you can put away for a potential down payment on your own future home. There is nothing wrong with living with people who love you to save as much money as possible.
- Make a Plan for Student Loan Payments
If you took out student loans to go to college, it’s essential to understand how much you owe and how quickly you can repay them. Sacrificing some luxuries in your budget to pay down your student loan debt will put you in a better long-term position. Many people delay paying off student loans and have a large debt hanging around for years.
- Use Credit Cards to Benefit You
Credit cards can help you do a couple of things: build your credit score and earn rewards. Both of these things can be very beneficial to new graduates as you probably don’t have a lot of credit history, and rewards are always nice. To best use credit cards, you can use them to pay for basic necessities and then pay the cards off each month. However, be careful. You don’t want to get into a habit of carrying an expensive credit card balance that could hurt you.
- Spend Within Your Means
One of the most important things to understand about your finances is that you need to spend within the confines of the money you have. Spending more than you can afford is a top reason people get into financial trouble, and a lot of times, it’s for silly things like taking an expensive vacation or buying a house that is too big for them. Don’t buy something thinking you can pay it off in the future. Instead, save the money and only buy what you want when you have the cash in the bank.
- Splurge On Yourself
This might seem contradictory to the last point, but it’s important to enjoy life a little. Working hard without breaks or enjoyment in your life is not good for your mental health. If you live on a budget, then there will be a certain amount of money you can use to splurge on yourself occasionally. Balance is always important!
Following these money tips can help you, as a new college graduate, get your career started on the right foot financially. You can improve your overall financial health by living by your budget, saving a large portion of your income, and eliminating debt as quickly as possible. Living by strong financial principles now will only give you more opportunities in the future.