The plan is to find a job in your area of interest and begin making a living; however, managing money can be more complicated than initially expected. To ensure you “find your feet” and use your income to your advantage, it is necessary to take various considerations into account.
This article will help by providing some guidance with the five top personal finance tips for college graduates.
1. Spend Less Than You Earn
The first of the five top personal finance tips is to spend less. Once individuals begin earning money it is common practice to “go wild” and spend it on luxuries. This may be acceptable for the first month or two, but soon the spending will catch up with you and you may find yourself in financial trouble.
To ensure you do not overspend, it is highly recommended that you draft a budget each month and adhere to the plan. This sounds quite simple for most people, but it is more difficult than one can imagine – most people lose self-control when left to their own devices.
Not all individuals are aware of how to draft budgets but there are tools available to assist with this issue. Online money management tools can be accessed via the internet and used to track spending.
By using these tools you will be able to both adhere to the budget, as well as identifying how you are spending your money.
2. Reducing Any Debt
Once you have established and drafted a monthly budget, it is necessary to adhere to the budget; however, no-one is perfect and there will more than likely be months were overspending will occur.
Individuals who choose to open a credit account will be well-versed with debt caused by overspending and how, if left unattended, it can grow to an overwhelming amount. One method to avoid debt increasing is to begin reducing the owed amount as soon as possible.
Begin paying off debts with the highest interest rate first, irrespective of the total balance. Once you have paid off one debt, continue to the rest if there are any. Be sure to budget for debt repayment to ensure that the repayment is within your budget and you are not making debt to pay off debt.
3. Prepare For Emergencies
The number one cause for financial despair is emergency situations. If you are involved in a car accident or experience problems with plumbing, you may find yourself blowing the budget to pay exorbitant service fees. To avoid this inevitability, because we all face an emergency at some point in our lives, it is highly recommended that you build an emergency fund as soon as possible.
Begin by setting aside a small amount each week or month and increase the amount as soon as you feel you are able to. Obviously, people will choose to ignore a contribution to the emergency fund every now and then; however, you must remember the importance of this fund and its long-term benefits.
4. Begin A Retirement Fund
When you are earning a low income, the idea of saving seems unimportant and a financial tip one can comfortably ignore. Do not ignore saving!! Saving money for the future is arguably one of the most important of the five top personal finance tips for college graduates. Graduates rarely consider retirement or even life 10 years in the future.
The fact of the matter is that you will age, you will reach a decade from now, you will retire and building a financial base for that period of time will ensure you live comfortably.
Saving for the future can be done through the use of a retirement fund. Many companies now present their employees with the option of a pension; however, it is possible to apply for retirement funds using external sources, such as banks, insurance companies, or putting money underneath your mattress. The monthly contribution is typically a percentage of your pay rather than a set amount.
5. Manage Your Own Money
For individuals who are confused by bookkeeping and find budgeting overwhelming, there is the option of delegating management of one’s finances. This may seem a simple way out; however, it can be highly disadvantageous.
Unless your mother is managing your books or another individual with your best interests at heart, it is possible your finances will be mismanaged. To avoid any instances where you may find yourself in financial difficulty, it is recommended that you read books on personal finance and budget independently.