College graduation is exciting and intimidating. As you step out into your first job, having a set of money management tools will keep you making money and able to spend it on the things that matter most to you.
1. Make a Personal Finance Plan
You need to be able to identify why you want money. While this seems obvious, it is different for each individual. Is your goal to buy a home? Do you want to have a robust retirement plan? Are you saving up for a high end gaming rig? Write down the things you want from your money because this will guide the rest of your financial management.
Start by thinking about long term goals. By the time you are retirement age, what do you want to have in place? Then bring your sights in a little closer. Identify what you want 30 years from now financially. Then, think about ten years and five years from now and finally, just one year from now. Think about, and write down, how you will get from where you are now to each of these steps.
Be sure your goals are specific, measurable, attainable, realistic, and have a time frame for accomplishment.
2. Create a Monthly Budget
It sounds boring, but thisbudgetwill be your road map to achieving the goals you laid out above. Identify all of your monthly income and write it down. Identify all your monthly expenses and write them down. Subtract your expenses from your income. If you have a positive balance, great! If not, look at where you can cut monthly expenses, or brainstorm ways to bring in a little extra cash.
Once you do have a positive balance, find a use for every dollar you have. Avoid having any money come in that you don’t have a plan for. Some should go into savings. Other cash might go towards extra debt repayment or even entertainment. The point is, have a plan, and do your best to stick to it!
3. Start Saving Now
Even if you can only save five dollars a month at first, it will add up quickly. Many bank accounts offer an automatic monthly savings deposit. Determine the highest amount you can put into savings each month and commit to this priority. This will be how you make those goals happen. Without savings, it is very easy to find your money simply disappearing each month into fast food or frivolous expenditures.
The savings account is also a helpful way to handle emergencies. If you lose your job or are injured, most experts recommend having at least three months worth of expenditures saved. This way you know you will have time to recover or find another job.
4. Pay Off Debt Quickly
Avoid debt if at all possible. If you do use a credit card, pay it off monthly, rather than allowing the balance to collect interest. If you have student loans, look into the excellent consolidation programs offered by the federal government to make repayment easier.
It is very tempting, especially the first couple of years out of college, to live beyond your means with credit cards. Avoid this by sticking to your financial plan and ensuring that your money works for you, rather than the other way around.
For the college graduate, money management is challenging and sometimes frightening! Following a plan will get you where you want to go, quicker than you might think. If needed, ask a trusted individual for advice on how to follow these tips, and you can avoid having to ask your parents for money.§
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