As a recent graduate or young professional, there’s one thing you likely have in common with your competition: student debt. In fact, 70% of college students graduate with student loans that total an average of about $37,172 that’s owed. However, between working to perfect your resume, gain the right experience and pay off your student loans, it’s also important to get a handle on proper finance skills that will help propel you to success and make life easier.
Between working to perfect your resume, gain the right experience and pay off your student loans, it’s also important to get a handle on proper finance skills that will help propel you to success and make life easier.Tweet This
Pencil Out a Budget Now
Here it is helpful to use a common financial planning method. If you were going to plan out your savings for a year in order to reach a specific goal, you would begin by writing out short-term goals that you would like to accomplish and analyze the cost of achieving each goal. You can use this same strategy in planning out your first year out of college. Ensure you are taking into account even the tiniest of expenses. Once you have a good grasp on the numbers needed in every area of your research, you can effectively plan and allocate a budget accordingly.
Avoid Taking on More Risk
As you likely might still be paying off various types of student funding or other forms of debt, it is important not to take on further risk. Effectively plan out how you will use your current savings to ensure that you don’t have to assume any more debt in order to fund any area of your lifestyle. The overall goal is to decrease your debt-to-income ratio to ensure you are set up for even more financial success as you move into the next stage of your career, and you can accomplish this by applying the 50-30-20 rule. Using this method, you’ll put 50% of your income towards necessities, 20% towards financial goals and 30% towards things you want.
Learn the Basics of Investing
As you begin to reduce your debt and increase your savings throughout your early career, learning how to invest your money will help you save for rainy days and other larger investment opportunities. Familiarize yourself with the difference between mutual and index funds and try downloading a robo-investing app that will help you invest in a low-risk, automated way in order to begin crafting a well-rounded investment portfolio.
“Most people won’t invest because they’re afraid they’ll lose their investment. We’ve all lived through dramatic market crashes. As a result, there is nothing we get asked more than “Is now the best time to invest or should I wait?”. Just like everyone else, we can’t predict the future.” – Learn how to invest your money
Take it One Step at a Time
Life as a recent graduate doesn’t have to be as scary as some people make it out to be. Learning how to properly budget your savings during this time period will help you gain a handle on your finances until you’re making enough money to do other things like pay off student loans and invest in unique opportunities that enhance your professional and personal life.