You Graduated, Now What?: Budgeting Tips for Recent Grads

Graduating college and entering the workforce marks an important milestone in many people’s lives. Instead of registering for classes and organizing campus housing, you’ll be applying for jobs and seeking an apartment in a new area. Possibly for the first time in your life, you are financially independent, which can be an incredibly liberating feeling. However, it’s hard to know how best to handle your new responsibilities.

Address Your Loans

Now that you’re out of school, you likely have six months before you’re required to begin making payments on your student loans. Get these figured out right away so you don’t fall behind on payments.

MarketWatch explained that there are many payment plans available to recent grads that appeal to different people in different financial situations. Be sure to do your research to find the best payment plan for you.

Create a Budget

Creating a budget is one of the best things you can do to stay financially stable. Once you have your loans figured out, you’ll have a clear understanding of how much of your income will be devoted to monthly payments. Other fixed regular payments like rent, utilities and auto payments will also be easy to determine. You’ll also want to calculate regular expenses that aren’t fixed, such as groceries and gas.

To create a budget, devote a certain dollar amount to each category, like rent, groceries, bill payments, savings and others. Be sure to include some room for enjoyment. A strict budget that doesn’t allow for some fun purchases, like going to the movies every once in awhile or a trip to your favorite cafe, is likely to be broken.

Start Saving

Now that you’re starting to make an income, it’s important to begin setting aside money for some future goals. The first savings goal you should have is to build up an emergency account. This is to be used in case you lose your job, have a major car repair or an unexpected illness or injury. The emergency fund is not for things like a credit card payment that’s higher than you’d like or to be spent on a spontaneous vacation.

Everyone’s emergency fund goal will be a little bit different, depending on their unique circumstances. Your emergency fund should have enough money to cover all your regular expenses for at least three months.

Once you have a decently sized emergency fund set aside, begin saving for other future goals, like retirement and a house. Retirement might seem like a long way off today, but your 60-year-old self will be grateful to your 22-year-old self for planning ahead.

Build Good Credit

If you have student loans or a credit card, you have already begun building your credit score. It’s important to know what your score is so that you can work to improve it if it’s on the low end.

To check your credit score, you can contact one of the three main credit bureaus: Experian, TransUnion and Equifax. You are entitled to one free credit report from each of them annually.

Your score will be a number between 300 and 850, Credit Sesame reported. The higher it is, the better, but typically:

• Below 550 is considered bad
• 550-649 is considered poor
• 650-699 is considered fair
• 700-749 is considered good
• 750 and up is considered excellent

The ideal credit score is either in the “good” or “excellent” range.

Once you know your credit score, you’ll know if you need to work to improve it or maintain it. Using your credit card regularly and paying off the balance in full every month is one great way to build or maintain a good score. Paying off your student loans responsibly will also help.