7 Tips That Will Lead You To Financial Success After Graduation
Handling your finances in the real world is very different than handling your finances in college or high school. Once you graduate college, you will be expected to become a productive citizen of society. That means getting a professional job and managing your money to help you survive.
After you land your first job, you may realize that life after college is not as lavish and care-free as you once thought. You will have a whole new set of expenses, and learning how to manage them may prove to be difficult. Unfortunately, many recent graduates lack the basic financial knowledge necessary to thrive post-graduation. Creating a strong financial plan before you graduate will put you miles ahead among many of your peers. Here are seven tips to help you create a roadmap to financial success after you receive your degree.
Make A Budget
When have you ever been truly successful at something without having a plan? The answer is likely never. As with anything else in life, to be financially successful you have to have a solid plan in place. That is where a budget comes in. When you get out into the real world and start making more than minimum wage, it may be tempting to buy things that you were never able to afford in college. But before you buy that new flat screen TV, or that expensive new pair of shoes, think about the impact that purchase could have on your financial health.
One of the best things you can do after you graduate is to live below your means. This means passing on that flat screen and opting to make responsible choices such as paying off your college-related debt. It may be difficult to factor in your housing costs and utilities before you even graduate, but make a conscious effort to limit your daily expenses. Keep a log of your expenses and review them each day, that way you know exactly where your pay check is going, and where you can cut back. The key to being financially stable starts with a budget.
Learn the Difference Between Wants and Needs
As we stated, it may be tempting to blow your salary on things you were never able to afford with your part-time college job, but learning the difference between want and need will be critical to your financial success. Before you make any purchase think to yourself if you really need it, and if you do, are there any cheaper alternatives? For instance, do you really need that expensive gym membership? Or, is there another gym in your area that offers similar services for a reduced cost? Being able to distinguish need from want will help you save money, become financially independent, and live a comfortable life.
Look into Investment Options
Many recent Filipino graduates do not think about investing right after college, and truthfully many people put it off for far too long. You don’t need to make huge investments in the beginning, and do not make any investments that will jeopardize your current finances. Before you embark on any kind of investment, make sure to do thorough research and understand all risks involved. A great place for a recent graduate to start with investing is by purchasing stocks. However, if you are unsure of where to start, many financial institutions such as Sun Life Financial have advisors who can help you make sense of investment options and choose the best option for you.
Be Careful with Credit
It may be tempting to start charging anything and everything on credit after you graduate; however, this type of behaviour should be avoided. A credit card can provide you with convenience, but if you start to get out of control with your spending it is easy to rack up debt that you may not be able to pay off. Keep in mind that the decisions you make now will impact you 10 and even 20 years down the road. If you don’t pay your credit card balances, your credit score will be negatively impacted, which will reduce your chances of being approved on future financing for essentials like a home or vehicle.
Though you have the potential to fall into debt with excessive credit card usage, a credit card can provide you with many benefits if used responsibly. Here are some basic tips on how to use your credit card responsibly so you do not get in over your head in debt.
- Always pay your bills on time: Late payments will not only result in additional fees, but also in a reduced credit score. Make it a plan to always pay your credit card bill on time, every time, and highly consider making more than just the minimum payment to avoid additional interest charges.
- Don’t charge what you can’t afford now: If you can’t afford to pay for something, don’t use your credit card to purchase it. Do not borrow against your future income. You should always base purchasing decisions on what you can afford now with your current income.
- Protect Your Credit: Make sure to check your credit card statements regularly to check for fraudulent activity. Only access your credit card account online using a secure network, and utilize a separate password for every online account you have, that way if one account gets compromised, your other accounts will remain safe from these dubious attempts.
- Be careful about opening too many cards: As a recent college graduate you will start to get bombarded with appealing BDO credit card offers, but be careful not to apply for too many because every time you open a new account your credit score will take a hit. In addition, opening multiple credit card accounts may make it easier to fall into debt, and harder to manage your spending. Would you really want to pay the annual membership fees for all of these cards by the end of each year?
Plan for The Unexpected
We all know emergencies happen, and they usually happen at the worst time possible. In addition, these emergencies could take quite a toll on your finances unless you have an emergency fund in place. Many financial experts will advise having three to six months of living expenses saved in an emergency fund to help assist should you experience some sort of major emergency. It’s not realistic to think this fund will be created within your first few years of employment, but if you make a plan to put a little bit of each pay check into a separate emergency fund, your future self will be thankful. Every little bit adds up, and you will be glad you made the sacrifice now in the face of a future emergency.
Automate Your Savings
One of the best ways to get ahead with your finances is to automate your savings. Make a plan to set up automatic transfers or deposits into your savings account after each pay check. This will make saving easier, faster, and more convenient. Automating your savings will ensure you don’t skip contributions and help avoid making unnecessary purchases.
There’s nothing wrong with being frugal and wanting to save money. Leave some money in your budget for fun, extracurricular activities, but make a conscious effort to adapt behaviours that will save you money. There are plenty of things you can do to save money on a regular basis such as:
- Opt to bring your lunch to work instead of eating out.
- Cook more instead of eating out.
- Rent movies and watch them at home rather than going out to the theatre.
- Complete DIY projects instead of buying store-bought goods
- Limit your mall visits
If you follow these seven tips after graduation you will be well on your way to financial success. Remember, becoming financially stable starts with having a plan. Keep to the plan and develop the habit of being financially conscious by starting to know the difference between needs and wants. And once you’re employed and capable of applying for a credit card, be mindful on how you use it. Remember to plan financially for the unexpected and ultimately adapt a frugal behaviour. In doing so, you will be financially prepared in facing both opportunities and the challenges in life.