You may have completed your college courses, but now you’re enrolled in what may be your most important one to date: personal finance in the real world. Believe it or not, the financial decisions you make in your first few years post-grad have a great impact on your future.
Navigating your finances after college graduation can be overwhelming. Don’t worry, we broke down everything you need to do in these first few months that will guarantee you’ll go from ramen to riches (one day, at least):
Tackle your student loan debt: We know you’ve heard this one before: Make a plan for paying off your student loans. For new graduates with federal student loans, you typically have 9-month grace period before payments begin. Use this as your chance to get ahead, if you’re able, and start making payments to pay down the principal balance right away.
Consolidate your student loans: If you have a high interest rate on one or more of your loans, consider refinancing and consolidating your separate loans into one loan with a lower interest rate. Yes, this means one single payment to remember! Tip: Check if your loan service provider offers an interest rate reduction for enrolling in an auto-pay program.
Build your credit score: As a new grad who is entering the workforce and taking on the next phase of life, you’ll need a solid credit score to help get you there. Maybe you’re renting an apartment in a new city or making your first big car purchase – whatever it may be, a high credit score will get you approved, and at a better rate, too. Aim for a FICO credit score of 700 and above, and know the 5 factors that determine it. Remember to make those student loan payments on time, because they will have a big influence on your score!
Master your budgeting skills: While a master’s degree may not be in your plan yet, you can master your budgeting skills in the meantime. Start your budgeting plan by writing down your income and expenses. Your expenses can range from fixed costs like rent and loans to variable costs like food and entertainment. Until you find what works for you, aim to spend 50% of your budget on essentials and bills, 30% on non-essential expenses, and 20% of your paycheck towards savings and investments.
Negotiate your first job offer: As you navigate the process of searching for and accepting your first “big kid” job, keep in mind that it is normal to negotiate your salary and/or benefits. This is likely your first big test of looking out for yourself financially, so do your research, analyze similar roles in your area, and create a counteroffer. Typically, a counteroffer is 10-20% above the initial offer. Tip: Benefits are just as important as your salary. Carefully evaluate your benefits package and the company’s health care and retirement options.
Live within your means: It may seem like a no-brainer, but the joy of finally having freedom and solid income can catch up. Enjoy life to the fullest, but remember to live within your means. Avoid temptations that can blow away your paycheck and your budget fast. It’s okay to treat yourself, but do so responsibly.
Reflect on your time in college and don’t be afraid to put in the work to get an A+ in your new journey of personal finance. Ask questions, do your research, and make educated decisions. For help with financing your next “Here We Grow” moment, visit PennCommunityBank.com.