The financial moves college graduates need to make


May is the time that many young adults are ready to venture into the world armed with a degree and hopefully soon a great job. With all of the excitement, financial matters are often forgotten which can be detrimental to their long term success. This is a critical time financially speaking for young adults.
What should be a college graduate’s first financial move?
Without a doubt, it should be to develop a reliable budget based on accurate income numbers and expenses that they will have. It is really best if they use a sample budget as starting point so they don’t miss important expenses or not have realistic numbers for certain expense categories.
What is a common mistake that college grads make when it comes to their pay?
The most common mistake is not understanding how much income they will really be receiving with each paycheck. They often forget they will be in a higher tax bracket, that they might have insurance and other costs coming out of their paycheck…all making their actual take home pay less than expected.
What is one of the most critical decisions they need to make early on?
Deciding how much of their income to spend on housing and transportation. These can be two of the largest expenses. Overspending here can really lead to a difficult financial situation when it comes other financial needs.  This is especially true for a college grad who has student loan expenses.
What is the recommendation for how much to spend on housing and transportation?
The best way to determine this is to use the budget. First complete all the other categories. Whatever is remaining is what they should spent on housing and transportation expenses. Too often, college grads start with these two items and divide the rest of their pay on all the other categories.  This rarely ever creates an ideal financial situation.
What are other financial missteps that recent college grads need to avoid?
Relying too much on credit to fund the expenses as they start living on their own. Building a large amount of debt early can often be a very big burden to escape. Finding ways to keep debt down as they start their career is very important especially for those who have student loan debt.
What is good plan to keep debt down when starting out?
Drive older cars, share an apartment or house with a couple of roommates, or even live with your parents for the first three or four months so you have the cash to buy all the essentials for living on your own.  There are considerable costs to consider when starting out including security deposits and costs for starting services that most college grads don’t consider.
What other advice do you have for keeping spending under control?
Adjust your lifestyle to your budget. These means cooking more, maybe less entertainment and most importantly, find a hobby or volunteer activity that keeps you busy. Too much free time is the biggest budget killer as we all tend to find ways to spend money when we are bored.

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