If you have a new college graduate in your life, do them a favor. Share lessons you’ve learned from some of your best and worst financial moves.
Here are the top three tips I share. (For related reading, see: Start Planning for College Costs Now With a 529.)
Pay Off Debt
Carrying student loan debt for too long will hamper your ability to purchase a home, save for retirement or reach other financial goals. Commit to putting a good chunk of your monthly income towards loan payment. Start by contacting your loan provider and establishing a payment plan to pay off the debt as quickly as possible. Don’t underestimate interest rates and the tangible losses from delaying your payments. The sooner you pay it off, the less you will pay in the long run. By setting up an online account with your loan provider, you can easily keep track of your loan balance and see for yourself how fast the interest fees accumulate.
If you have more than one loan, pay off the loan with the highest interest rate first. Or consider consolidation options so that you only have one payment to make—and be sure to secure the lowest interest rate possible. As you earn more, consider increasing your regular payments to eliminate the debt sooner than planned. Even adding just an additional $25 a month or paying one extra full payment a year will significantly decrease your loan.
Saving for the future is one of those things we all know we should do, but too often we just don't do it as early, or as often, or as much as we should. Whether you are overjoyed to see real income for the first time in your life or shocked by a smaller-than-expected paycheck, get over it. Creating the habit of saving as soon as possible is paramount—no matter how much or how little you have.
Open a savings account. Ideally you will set aside at least three months' of expenses in an emergency fund to pay for unforeseen expenses such as a new engine for the car or in case you suddenly lose your job. Kick-start your account with graduation checks from friends and family. (For related reading, see: How to Get Out of Paying Your Student Loans.)
Live a Low-Maintenance Lifestyle
Simply put, learning to live within your means requires you to either make more money or spend less. A starting salary doesn’t mean your lifestyle will look like the life you enjoyed while living off mom and dad—especially if you have debt. Make a list of your regular expenses (including loan and credit card payments and savings deposits). Then look for ways to trim those expenses such as little things that add up quickly. Don’t buy lunch or a Starbucks coffee every day.
Then use the envelope system where you insert a portion of each paycheck to envelopes labeled with each outstanding debt. Skip cable and stick with Hulu. Once the debts are paid off, use the envelopes to build up savings for your short and long-term goals.
There's an App for That
Personal finance apps like Mint and PocketExpense can help. Some of these apps help you save money automatically, indicate how much money is safe to spend, show monthly cash flow and will automatically invests spare change. (For related reading, see: Student Loan Debt: What Every Borrower Should Know.)
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual