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So, you’ve finally made it and finished your college education! Now what?
After finishing college, it’s now time to face the real world. For most recent college grads, it's normal to take a while before feeling settled and comfortable with your finances and state of living. This can be attributed to the lack of financial education. Most colleges and universities don’t teach their students how to handle their finances, even though a Credit Karma survey points out that a whopping 63% of respondents think that financial literacy should be part of compulsory education. And with the average college graduate owing at least $29,800 in tuition debt, it's important to have a clear plan on how to manage your finances for the road ahead.
With that said, here are some critical financial steps that recent college grads should take to secure their future.
Open a 401(k) right away
If you’re lucky enough to find a job as soon as you graduate, it is important that you start a 401(k) plan as soon as you can. A Merrill Edge report shows that investors as young as 22 have been opening 401(k) plans, proving that millennials and Gen Zs understand the importance of having a dedicated retirement plan.
With a 401(k), recent graduates will be able to save easily even if they don’t have any investment knowledge and experience. What’s more, investing in a diversified growth-oriented portfolio can safeguard your funds from massive taxes down the line.
Build your credit score
While you may be a little wary about spending credit due to student debts and financial uncertainties, you’ll have more financial opportunities in the future if you build up your credit score now. Petal Card’s post on credit scores maintains that when it comes to building your own credit score, the first step is to become an authorized user of a credit card shared with a family member or trusted friend. This can help build your credit record.
In the same vein, you should be asking your landlords to report rent payments. Having a record of you regularly paying your rent can build your reputation as a trustworthy consumer, which goes a long way when building your credit score. Keeping records may be a tedious task, but the payoffs are huge — reduced annual percentage rates, expedited loans, and better loan terms are all possible if you’re able to prove your creditworthiness.
Learn how to plan long-term budgets
Now that you’re on the road to being fully financially independent, it’s time to improve your budgeting skills. Shifting from living in your parents’ house to having your own place will entail a lot of planning so you don’t get financially overwhelmed. As ‘Episode 31 of Two Black Guys With Good Credit’ points out, no matter how much money you're making, there are definitely ways for you to budget it correctly. Other than carefully allocating funds into the usual expenditures like bills, housing, and food, you’ll also have to factor in any long-term loans that you might have. Your student loan is one of these, and strictly following a pre-planned budget squashes the chances of incurring any late fees.
But if you find this task a little daunting or confusing, you can look for outside help by consulting a financial advisor. Today’s financial advisors go beyond monetary concerns, and they can help you with strategies to secure your financial well-being. Moreover, The Balance claims that financial advisors can help you find the best investment plans and keep your financial fears in check.
Through financial literacy, recent college grads have a better chance at living a stress-free and debt-free life. It takes careful planning to be financially stable, but it’s all worth it in the end.