It’s that time of year again! Recent grads are pounding the pavement and making moves. I should know, we keep seeing them at my day job. While things are definitely looking up for the class of 2012 there’s still something we all have to learn at some point – getting your money in shape. Yes, you’re new job may soon be met with bills, student loans and financial obligations you probably didn’t have before.
Fortunately, you won’t have to learn things the hard way (like I and so many others have) thanks to this week’s awesome guest post. It is my pleasure to welcome Deborah Devenney from Impulse Save – that snazzy Boston financial startup that’s helping people save for the things they care about while adding some fun social media flair to your finances. Seriously, Impulse Save has already helped me save up over $200.00 for my upcoming trip to New York in the Fall! This week she discusses her 5 steps for getting your finances in order after college. Whether you’re just out college, just received your graduate degree or still need a little nudge, this post will definitely point you in the right direction. Enjoy!
5 Steps to Getting Your Finances In Order After College
Dear Recent College Graduates Everywhere,
Today is your day.
You’re off to Great Places!
You’re off and away!”
-Dr. Seuss, Oh, the Places You’ll Go!
Oh Dr. Seuss, you are always so encouraging! And he’s right, you know: you’ve made quite a journey so far, and the road is really just beginning.
When I graduated college, I was so excited to no longer be a broke college student. I got a job – and a paycheck! I was no longer putting every penny I earned towards tuition and I felt like the richest girl in the world!
However, soon after I saw my first paycheck, it hit me: no, I was no longer a broke college student – but now I was a recent grad in debt. I had to figure how to control my finances, and fast!
I knew that it was important to get on the right financial foot early; setting good habits and controlling my spending and saving now would only make things easier as time went on. I’ve been out of college for six months now, and here are a few tips I’ve picked up along the way that I thought you might find helpful.
Below is a list of 5 things you need to get your finances in order after college.
1. A place to call home
You need a place to live. If you are moving home, how do your parents expect you to contribute to the home? Will you be paying rent, or helping out with chores and errands around the house? If you are starting out on your own or with some roommates, what do you need in your new place? What DIY projects can help you feel at home on a small budget? Do you have a long-term job that can allow you to sign a lease, or should you stick with a month-to-month rent?
Everyone is different, and it’s important to have a very honest conversation with the others in your home about expectations for everyone involved. I decided it was best for me to move back home after graduation because I graduated in December so it would be difficult to find a roommate at that time of year. Also, I’m going to grad school in August, so I wanted to save towards the next stage of my education. My parents are very gracious and not expecting me to pay rent while I am a student; however, I do help cook, clean, and drive my younger siblings to their activities in exchange for free food and housing. Not a bad trade-off!
2. A budget to track your paycheck
That first paycheck feels so good in your hand – but before you head to the mall, plan carefully because that little check has a lot to do! Make a spreadsheet in Excel or Google Docs to put a percentage of each check towards different needs. For me, I get paid as a freelancer, so I even had to put money aside for taxes at the end of the year. I put 20% of my check to taxes, 10% to tithe (I think it’s very important to give a portion of each paycheck away), 30% to student loans, and the rest gets broken down into savings and living expenses (including the cell phone bill and gas).
When I got my first paycheck, it looked like so much money, I was so excited! But then I entered the numbers in my budget and realized it wasn’t quite as much as I thought. That new smart phone I just HAD TO HAVE was not going to happen for a few months. So I set up a long-term goal and kept going!
3. Planning Ahead
Don’t let yourself be surprised by what life throws at you. You are smart, and there are many things you can prepare for far in advance! I know you have a lot to save for already, but don’t forget that every little bit counts and that once you have a good savings cushion, you can spend a little more and treat yourself down the road!
Start saving right away for an emergency fund – stocked with enough to keep you going to 3-6 months should your income change. Set up a Roth IRA or other retirement fund – check out this post by Stumble Forward that shows you how much more you’ll have by the time you retire if you start saving now! Start repaying student loans right away (even before graduation). Even though most loans give you a grace period for six months after graduation, start saving and repaying early to be ahead for years! Just make sure there is no penalty on your loans for repaying early.
4. Special Expenses
Everyone has a few special things that can really drain your account if you don’t take them into consideration when building your budget. Don’t forget about specific medical expenses (eye care, allergy medicine, doctor copays), a new wardrobe for work or relocation, gifts and details for all your friends’ weddings, or an impending car or computer replacement.
Some of my special expenses include: buying contact lenses and glasses, buying new clothes when I lost weight after graduation (mixed blessing, I suppose), replacing my dying computer, and trav
el expenses and gifts for the many festivities after graduation (weddings, parties, get-togethers). By starting to save as soon as I started to earn, I was able to handle these expenses as they came with no problem!
5. Side hustle
So you’ve gotten your dream job – or in most cases, something a little lower down the totem pole. And that’s great, but don’t stop there! These are very important years of your life, where there are so many decisions to be made and adventures to take. Be on the lookout for side jobs to help you get ahead on your bills, save up for a great adventure, or just splurge every once in a while on something for you. Side jobs are also a great way to meet more people, especially in a new area, and gain new skills.
I hope these tips for recent college graduates are helpful to you. Just remember to keep your chin up and that although you may feel like you’re living on nothing at the moment, you are able to plan for great things down the road! So enjoy the most frugal years because they are great years. Someday we’ll look back and say, “Wow, look what we did!”
Yours in frugality and positivity,
Deborah Devenney is an online community manager for the financial start-up ImpulseSave. ImpulseSave is a free online tool and saving community that allows users to set up savings goals and then turn their impulse buys into impulsesaves. She truly believes that the little things add up! Deborah recently graduated college with $21,000 in debt and after law school that number will only grow. However, she is confident that with planning, hard work, and a positive attitude, she can pay it off soon and still have fun in the meantime!