Graduation is just around the corner and you’re about to enter an exciting phase of your life. A new home, a new career, or maybe even a new city. But are you ready?
It’s easy to think there is plenty of time to worry about saving later, especially once you’re earning a consistent income. However, evaluating your expenses and creating a solid financial plan now is essential.
For OnPoint Community Credit Union’s Santa Clara branch manager, Brandon Drivon, it’s a scenario he has seen many times before. “Graduating from college is such a monumental step in financial independence,” he said. “Many new graduates are tempted to make big purchases or spend beyond their means.”
Drivon encourages soon-to-be college graduates to prepare for a life of financial sustainability. “Now’s the time to start thinking about smart financial strategies that set this year’s graduates up for success in the real world,” said Drivon.
Drivon gives his best tips for soon-to-be college graduates:
- Continue living like a student as long as possible: Understand your living expenses and be realistic about where you stand on income and expected debt payments. Resist the temptation to ratchet up your lifestyle simply because a new job has increased your cash flow. Put aside any excess funds to pay off loans, contribute to an emergency fund, or put into a 401K plan.
- Now that you’ve joined the working world, let’s plan your exit strategy: Start thinking about retirement and investing. We know it seems eons away, but it’s never too early to start saving! Your employer may offer a 401(k) or similar retirement plan, where contributions are tax-deductible or even matched. This money grows tax-deferred until you take it out, ideally, once you’ve retired.
- Remember to set up an emergency fund: Always be prepared for the unexpected, such as a layoff, job transition, or costly medical, housing or vehicle expenses. Start by putting aside one month’s worth of expenses and work to build up to 12 months. As you settle into your new post-college life, continually review your monthly expenses and identify areas where you can cut back. Before you order that venti pumpkin spice latte, consider redirecting your caffeine funds toward your emergency fund.
- Consider your credit score your newest BFF: Your credit score will be your best friend when it comes to qualifying for apartments or getting lower rates on auto loans or a mortgage. Sometimes employers can use your score to vet you for a job.
Remember, not all debt is bad. Smart debt strategies can help build credit. Consider using a credit card for your daily expenses, while putting enough aside to pay it back at the end of each month. If you have roommates, put the utility bills in your name and pay them off on time. Establishing a solid credit history can set you up for lower interest rates when making large purchases in the future.
- Confirm your student loan debt and establish a repayment plan: Many college graduates face a huge financial burden upon receiving that coveted diploma: hefty student loan debt. In Oregon, the average student loan borrower will owe over $36,000 on graduation day. Complete your school’s exit counselingrequirement upon graduation and choose a repayment plan that fits your situation and goals. If you get a promotion or raise, consider making extra payments towards the principal.
As you prepare your post-graduation plans, implementing these steps will set the stage for your financial future. You can choose to develop the habits of either a saver or a debtor. The path you choose can be the most essential money decision you make for yourself. Visit our Santa Clara branch inside Fred Meyer to meet with my team if you need help planning your next adventure. We’d be happy to work with you to get you set up for success.
