If you’re getting ready to graduate in the next year (or less), you’ve got a lot on your plate. Finding a job in your field, deciding where to live, and starting to create a new lifestyle and routine beyond your educational career can be a lot to think about. Your finances may be the last thing on your mind right now. Depending on your situation, you might have a grace period with your student loans, and while you get up on your feet the last thing you want to do is figure out how you’re going to pay down your debt, create a financial plan, and more.
Right now, you don’t need to bite off more than you can chew. Instead, think about taking small steps now that won’t eat up a bunch of your time, but will set you up for future success.
Step #1: Decide On Student Loan Repayment Plan
Even if you aren’t jumping into repayment right now, don’t put off deciding on a student loan repayment plan. Take some time to research different repayment options, and figure out what’s best for you. A few you might want to look into are:
- Standard repayment
- Graduated repayment
- Extended repayment
- Pay As You Earn
- Revised Pay As You Earn
- Income-Based Repayment
- Income-Contingent Repayment
- Income-Sensitive Repayment
Depending on your career path, and your anticipated salary as a new grad, you might find some of these repayment programs fit better into your budget and long-term repayment strategy. Keep in mind that the repayment plan you choose impacts how you pay your loans immediately, but also what your finances look like in the years to come.
#2: Start Thinking About Retirement
You might be thinking:
I haven’t even picked a loan repayment plan – now I’m supposed to think about retirement, too?
I’m not saying you need to dive into creating a fully formed retirement saving strategy. Just start thinking about it. Take the time to look at your new employer’s retirement plan. Do they offer a 401(k) or 403(b)? How about an employer match? Do they offer an HDHP insurance plan with an HSA for medical expense savings?
Knowing what types of savings vehicles are available to you, and what other benefits are out there, can help you get a better idea of how you want to start saving. Even if you’re only saving up to your employer match at first, it’s still good information to have as you get a handle on your financial situation.
#3: Get a Handle On Cash Flow
Cash flow is something that you may not have had to think about very much during your time at school. Sometimes there are grants that help fund your living expenses, or loans that cover books or room and board. Even if you worked a job while in school, your expenses weren’t as big of a deal. Budgeting is different in the post-grad world, but that doesn’t mean it’s more complicated.
The simpler you can keep things, the better. First, keep your spending low. Even if you land an amazing job with a high salary, that’s not a reason to move into a high-cost apartment, buy a new car, and start booking big vacations every three months. Try to keep your expenses minimal where you can, for as long as you can. Then, you’ll have a bit of extra cash flow to fund the experiences or bigger purchases that are meaningful to you rather than over-spending on rent.
#4: Understand Your Spending
A lot of new grads are surprised by how many big expenses they run into, but they write them off as a “one-time” expense. For example, you might buy a new car one month, owe a security deposit on your new place the next month, decide to adopt a dog the month after that, then all of a sudden you need to fly home for the family reunion which isn’t going to be cheap.
There’s nothing wrong with spending in line with your values, but if you’re finding that “one-time” expenses keep stacking up, they aren’t one-time expenses. You’re establishing a negative cash flow cycle where you’ll struggle month-to-month. When you’re a new grad, it’s important to break that cycle so that you can start saving, setting financial goals, and living comfortably.
#5: Automate What You Can
Even if your finances overwhelm you right now, automating them can help you stay organized and on track. Here are a few ways to automate:
- Track your budget using tools like Mint or YNAB
- Set up auto-pay on your bills when you can
- Create automatic deposits from your paychecks into a savings account to start building your emergency fund
These are small steps you can take to track your budget, organize spending, pay bills on time, and start saving – and setting them up only takes a few minutes. Block off an hour or two and automate everything you can when it comes to your money.
#6: Set Some Goals
When you first graduate, you might not know exactly what you want for your future. That’s okay! You don’t have to know where you want to move when you retire, or even what type of house you want to buy when you get married and have kids (or if you even want to get married, have kids, or even buy a house). But, you can still set a few financial goals around your savings, debt repayment, and short-term expenses.
For example, you might organize a savings hierarchy for yourself to make sure your emergency savings is fully funded and you’re on track to save for retirement. You might also decide that you want to start putting money aside for a new car, a new house, or even to move across the country. Your goals can be flexible – they’ll change as you go through your life. Still, setting them now puts you on a path to smart saving and spending habits that line up with what you value.
Are you a new grad thinking about your finances? Reach out! We’d love to walk you through a loan evaluation, or just to chat with you about your goals – and how your finances can help you achieve them.