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Starting out financially strong after graduation

The first six months after graduation are a key time in a college grads financial life so whether you are the graduate or have a child graduating there are a few financial steps that can really improve the probability of having long term financial success. Learning these basic financial habits early in life will be a great foundation for future success.
What should be a college grads first step after college graduation?
Develop a budget that is realistic based on the job they have or hope to get.  The budget helps in making smart decisions like where to live, what type of car to buy and a several other important decisions that have to be made after graduation.  Without a real budget, you can end up renting apartments or buying cards that leave you with little money for all the other activities and expenses.
After they have developed a budget, what should come next?
The next most important step is to develop a spending plan.  Even though you have a budget, if there is not a disciplined spending plan in place for the discretionary money in the budget will run out of money and start using credit cards to fund everyday purchases to get to the next paycheck. This then leads to a problems that could become catastrophic if not dealt with early.
How does building good credit factor into long term financial success?
It is a critical step.  Having good credit can be beneficial in many ways from lowering the interest you pay on car loans or mortgages to helping lower the cost of other expenses like insurance.  Plus, handling credit wisely can helps avoid being in too much debt when you are first starting out. 
What’s the best way for new grads to build a solid credit history?
Build credit by paying all bills on time and not carrying balances over on credit cards.  Charge and pay off all balances in the same month.  Also, don’t open too may credit cards or store charges and avoid the no interest no payments for 2 year offers when buying apartment furnishings. This is a critical time to avoid building debt faster than building savings.
What else can college grads do to be financially successful?
Find ways to lower expenses on everyday purchases so using coupons and loyalty reward cards for groceries and when eating out.  Keep the thermostat set a little warmer in the summer and a little cooler in the winter to save on utility bills. The practice of looking for deals and finding ways to save are key long term financial skills.
Are there any other important steps for those just starting out?
One that is often overlooked by those who are younger is choosing the correct health insurance plan and also contributing to a health savings account. Medical bills are a leading cause of financial problems so planning for them correctly is really important. The new high deductible health plans that are prevalent require significant outlay of cash before the insurance starts paying.
What types of saving funds should college grads establish?
First and foremost, immediately enroll in the 401k plan if your employer offers one.  This is the most important savings plan to establish.  Next, start building a rainy day fund using some type of automatic savings option.  If you want to go max on savings, establish savings accounts for big upcoming expenses such as vacation, weddings, or buying a home.

Posted: 5/12/2016 with 0 comments

Categories: College, Money Matters, Students

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