Transitioning from college life into the real world can be a bit intimidating. You have spent all of your time focusing on grades, networking, and preparing for your first real career post graduation. However, the big transition can be much more than just finding your first “big” job. For many, it’s a transition to full financial independence. Here are some tips to help you achieve and maintain financial independence as you start your new life.
1. Evaluate Your Student Loans
Student loans can accumulate quickly while you are in school and it is easy to forget about them until the time comes to pay them back. Generally, you have six months to settle into a career before you have to start your payments. If you find that your income isn’t large enough to make the full payment each month, you can contact your loan provider to discuss income-driven payments. You might also consider student loan counseling. Remember, loan deferment and forbearance should be used only as a very last resort. Paying off the loans should be your priority. After all, the interest on the loans will not stop just because your payments have.
2. Write Out a New Budget
You are likely adding many new expenses to your monthly budget after graduation, and you need to create a new post-diploma financial plan. Some new expenses you may encounter include student loans, apartment rent, utilities, and insurance. In addition to regular bills and expenses, such as food and clothing, you need to budget for unavoidable expenses such as auto and home repairs or medical costs. These events are inevitable and should not be considered emergency expenses. If you are debt free already, you can add additional savings and retirement goals to your budget. Be sure to check out our simple budget calculator to help you get started.
3. Start Saving
Savings accounts are perfect for emergency funds and purchases that you are saving up for. The purpose of building these savings is to avoid creating debt in the future. As you join the “real world,” make sure to build a small emergency savings. While the amount largely depends on your personal situation, $500 is a good place to start. Emergency funds are only used for events that you cannot predict. It is important to understand this distinction. Getting new tires is not an emergency if your old ones are very worn down. You knew that the tires would need to be changed. However, if you blow a tire on the side of the road, it is a perfect opportunity to dig into your emergency savings.
4. Get Good Insurance
One of the best things that you can do to set yourself up for long-term financial independence is preparing for the worst. Having quality insurance is priceless, because in the event of an accident you will have coverage. Begin thinking about the many types of insurance that you need: life, auto, health, and/or renter’s insurance. Prepare for whatever the future may hold.
But don’t always assume that more is better.
For instance, you might find that a high deductible health plan with an HSA is a great deal, though many people will opt for plans with lower deductibles. High deductible health plans will cost you very little each month, though you will pay more if something goes wrong. If you have a lot of savings set aside, this could be a great option for you. After all, if you end up not going to the doctor much, you can save a ton of money that other folks pay in premiums but don’t really “use.” It comes down to understanding your level of risk tolerance, and having a plan for the unexpected. Plus, think about how frequently you visit the doctor, which can affect this decision greatly.
5. Prepare for Retirement
Retirement should be your focus after your debts are paid off and your emergency fund is built. You may think that this is a bit of a stretch since you just began your career. However, starting your retirement fund when you are younger will make a huge impact on how quickly your investment grows. Beginning this process at a young age is crucial. Check with your employer to see if your job offers 401(k) benefits or go to your bank to set up an Individual Retirement Account (IRA).
Need More Help?
We’ve shown you 5 big steps to take after college. If you need more help, or hit some bumps along the way, you should know that there are companies like Clearpoint here to help. You can work with a credit counselor if you find yourself dealing with significant credit card debt, or you might benefit from student loan counseling.