Your college career has come to an end, and the real world has quickly swooped in to replace it. Joining the workforce and having access to new-found money is exciting, but be careful to not get carried away. Before you start blowing your cash, make sure to grab the reins on your finances. Set yourself up early to tackle your debt, and find financial stability going forward. Here are some ways to straighten out your personal finances and rid yourself of debt.
Repay Student Loans
Everyone knows that the scariest part of college is what immediately follows it – the dreaded student loans. As tempting as it may be to run the other way, you will have to pay off your loans, and doing so doesn’t need to be a nightmare. Luckily, most student loans do not kick in until six months after graduation. So, if it takes you a while to land your first job, don’t stress over it, but do be aware of when your payments will start. If you are one of the lucky people who have a job waiting the moment you leave school, make it a priority to start saving part of your income so that when your loans do kick in, you’ll be able to start making payments with ease. If you have the cash flow, check to see if you can begin paying the loans during the grace period.
Research the loans that you signed up for and make sure you fully understand the payment amount, schedule, and what is required from you. Some universities will offer exit counselling to make sure you understand everything about your loan – so take advantage of this option if it’s provided to you. If not, sift through the inner depths of your student loans website before you start receiving bills, so you know what’s to come. Although it might sound best to knock out your payments as soon as possible, make sure your repayment plan is realistic to how much money you will be making. You can also select to have your loans be income-based, so the amount owed each month is proportionate to your income and expenses. Consider having your loan payment directly withdrawn from your bank account each month, so you never neglect a payment.
Set a Budget
Creating a budget – and sticking to it – is one of the best ways you can gain control of your personal finances. No accountant necessary, you can do this all on your own.
Start with your monthly income and expenses. Create an easy-to-read spreadsheet, and plug in the cost of all your necessary expenses first – bills, groceries, your loans payments, etc. Then calculate how much of your income will be needed to go towards these things. Once you know how much money you will have to spend monthly, you can allocate money towards extra categories for things you want – entertainment, streaming services, new clothing, for example. It can take some practice, but ideally your expenses should be less than the money you are making. Sounds like a given, right? Using services like Mint can also help you understand how much money you are spending in each category, and how to restructure your budget.
Finance a Vehicle
Once you have established your budget, you can start planning for how you will finance the car you wish to purchase. Whether you plan to purchase a cheap car in full, or will be making monthly payments, you will want to do your research and start saving well in advance. If you want to pay for your car upfront, saving can set you up to do so. If you will be making a larger purchase that you will pay off over time, the money you save up can go towards a large down payment on your car.
Decide on the criteria you are looking for in a car and determine the types of cars that fit. Once you have a car in mind, browse through different dealerships and calculate what your monthly payment would be. Look back at your budget and determine the absolute maximum amount you can afford to pay each month. This might mean putting your dream car on the back burner for a while and settling for a car within your means, but it will keep you from increasing your debt.
In order to finance your car, you may need to take out a loan. Be sure that before doing so, you understand what you are signing up for. The three main things to pay attention to are the loan amount, the length of the loan, and the APR. It’s important to understand how much money you are taking out with a loan, and how long you have to pay it back. The APR will be the interest rate you pay on your loan, so aim for an option with a low APR so that the interest added to your loan remains low and saves you from additional payments.
Plan Purchases in Advance
Everyone is guilty of impulse shopping from time to time, but planning your purchases ahead of time can help you stick to your budget and limit unnecessary spending. Plan. Research. Save. This doesn’t apply just to your grocery list! Keep a list of things you need or have wanted for a while, and try to limit purchases that go beyond that list. Research your items before you buy them by comparing prices among stores, and take advantage of buying them when they are on sale. Most stores have print and online coupons, so take advantage of being able to save money by having coupons on hand.
From small scale purchases like groceries to buying a house, each purchase should be given a thorough thought process. Not only will this help you save money, but will ensure that each purchase fits within the budget and criteria you are looking for.
Putting away money each month into your savings account will help keep you from overspending, and will provide financial security in the case something should happen. After you have adjusted to your monthly income and expenses, determine how much of each paycheck you can allocate towards your savings. If you are paid through a direct deposit, inquire with your employer about their ability to automatically separate a portion of your paycheck into your savings. If they are not able to, create a habit of depositing money into your savings at the same time each month and start building up your account.
It is also good to get into the habit of saving any unexpected money you come across like gifts, rebates, or bonuses. Continuing to add, even if just a little, can significantly help grow your savings over time. Consider signing up for a debit card that rounds up the remainder of the dollar amount on any purchase and automatically transfers to your savings. If you have established good credit, you could also look into cash reward credit cards which return a portion of money from your purchases. These are great ways to get more money out of purchases you are already making, and are easy ways to save in increments.
Don’t let your personal finances haunt you any longer. Get a hold of your finances early on, and plan for a financially secure future.