7 financial management must-do's for new graduates - KCTV5 News

7 financial management must-do's for new graduates

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By Andrew Housser

This year’s graduates have tossed their caps high aloft, found them again and safely stored them for future nostalgia. Many grads have secured entry-level jobs and are launching their careers. Next up: Getting the first paycheck. Most likely, that check will seem like a large amount of money, but will disappear all too soon unless you prepare with a budget. Here’s what new graduates need to know to make the most of their finances, now and in the future. 

Be prudent when anticipating your income. If you haven’t landed a job yet, prepare yourself with realistic expectations. Many graduates’ salaries will not live up to their expectations right away. Do not commit yourself to any expenditure, such as a car payment or apartment lease, until you are certain of your income. That means a signed job contract and, ideally, your first paycheck already in hand.

Pick a simple method. Budgeting need not be complicated. Choose a method that works for you. For instance, 50/30/20 budgeting asks users to allocate 50 percent of their take-home income to cover needs, 30 percent to cover wants and 20 percent for savings and debt repayment. Needs include expenses such as housing, food, transportation and minimum payments on student loans and other debt. If your costs exceed the limits in one category, you will need to make different choices or find a way to increase your income.

Prepare to handle debt. The average new college graduate owes more than $39,000 in student loans. Payments on those loans average $200 to $400 per month, depending on repayment plans. For a college graduate with an average income of about $50,000 per year, those student loan payments equal about 10 percent of your take-home pay.

Start an emergency fund. You will likely have about a six-month grace period before student loan payments begin. This is the ideal time to start an emergency fund. Set aside the same amount you will be paying on your loans in an emergency fund account each month. When your loan payments start, continue adding – even if a very small amount – to the emergency fund account each month. These savings will prepare you for unexpected expenses in the future – without having to go into debt to cover them. Your emergency fund should eventually be able to cover at least six to nine months of necessary living expenses.

Pay yourself first. Your grandparents may have told you this adage, and it holds true just as much today as it did years ago. Every time you earn money, save some. It is an investment in yourself. In addition to your emergency fund, save for retirement. If your employer matches your contributions, aim to contribute the maximum that will be matched.

Always pay on time. For any bill, always pay on time. This simple step will help you build a solid credit score over time.

Check in regularly. Similar to any goal, whether fitness, family, healthy eating or career planning, monitoring a goal will help you achieve it. Review your finances often. At least weekly, check bank and credit card accounts online to watch for any unexpected or fraudulent activity. Each month, be sure you have scheduled payments on all accounts due. Take time to reconcile your accounts and monitor your progress toward savings and debt repayment.

Managing your finances can be challenging, but it also can be rewarding. By planning carefully and monitoring your debt and payments, you can put yourself on the road to a healthy financial future.

Andrew Housser is co-founder and CEO of Freedom Financial Network. The family of companies, providing innovative solutions that empower people to live healthier financial lives, includes Freedom Debt Relief and Bills.com. Housser holds a Master of Business Administration degree from Stanford University’s Graduate School of Business, and a Bachelor of Arts degree from Dartmouth College.
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