Saving and Budgeting Tips for New College Grads

When you first experience the freedom of life after college, it can be both exhilarating and overwhelming.

 

While you have the opportunity to pursue your ideal career and lifestyle, you are also faced with all the responsibilities that come with these freedoms. You may have never paid your own bills before. However, finances after college do not have to be a source of worry.

There are several simple steps you can take to ensure you are budgeted to live within your means. This may take more discipline than was required in college, but you will also learn to control your own financial decisions and future. At the same time, you can begin to consider your long-term goals and how you plan to reach them. With commitment and determination, you can start to pay off your debts, save for your goals and look for creative ways to save money from the moment you receive your degree. It is all about funding your today, tomorrow and future.

Budget for All of Your Income and Expenditures

You may have already had a budget of some sort in college. Your new budget, however, will need to be more comprehensive. If possible, you should try to work out a budget that accounts for all your income and expenditures. This is not intended to be a way to spend all of your money. Rather, you should budget for your savings contributions alongside your monthly bills and expenses until every dollar is accounted for.

It is also important to include all sources of income in your budget. If you are able to, you can address your income section as a challenge, looking for ways to increase your earnings every month. You might consider taking a side job, for example.

Make sure to include all of your bills in the budget to begin with, using the remainder of the available money to determine how much you have to spend in optional categories. Try to remain as realistic as possible when structuring the budget. You should be able to spend money on social events and entertainment, but not so much it impacts your ability to live within your means. If you need help determining your categories of spending and saving, there are many budgeting apps available to help. Some of the best are:

  • MINT
  • Acorns
  • PocketGuard
  • Albert

Some typical categories for spending can include money you spend on rent, food, insurance (car and health), utilities, gas, clothing and entertainment. Once you have your categories, you can track your spending in each one and determine where you can make changes. For example, buying work clothes may seem like a very important budget item, but you could find more budget friendly items on sale or at thrift stores. By keeping to your budget, you can force yourself to look for ways to save money.

Educate Yourself

Unless you studied economics or finance in college, there is a chance you may not know many common financial terms. This is not unusual, particularly if you have never been financially independent before. However, you should not wait before educating yourself into financial literacy. Make a point of learning the terms for different types of bank accounts, savings plans and other finance and investment activities. Consider buying a couple of well-ranked and expert-recommended books on finances, or perhaps taking a short personal finance course. Some great books, and short reads, include:

  • “No One Ever Told Us That” by John Spooner.
  • “The Money book for the Young, Fabulous and Broke” by Suze Ormon
  • “The Broke Millennial” by Erin Lowry

As well as learning the correct vocabulary, you should also learn about the value of your money and how much you should be expecting to spend. For example, you should familiarize yourself with the common housing costs in your area before seeking out housing of your own. Research the potential expense involved in owning your own vehicle as opposed to taking public transport. The more you know, the more informed your decisions will be.

Make a Plan for Your Bills and Payments

Keeping up to date with your non-optional expenses, such as rent, car payments and debt payments is crucial to living within your means. It is important to know exactly what you need to have paid, and by when, in order to maintain a good credit score. This can also help you to avoid late fees and other unnecessary expenses.

Using an automated direct deposit is often a good option, as it does not require you to remember to pay the bill. You can also set up reminders using an app. There are also apps for paying your bills in one lump sum each month. The only catch with all of these automated services is that you have to know you will have money in the bank at that time to cover those bills.

You should also have a plan for high priority bills and payments. For many recent graduates, this will include paying off student loans and other debt. Consider setting up a stricter budget than you normally would until all of your debt is paid off. If you are paying toward a long-term savings goal, you might be able to save more effectively by using automated payments every month.

Set Long Term Goals

Having just graduated college, most of your plans will naturally deal with the immediate future. You will be looking for accommodation, a job and perhaps addressing your finances on a month to month basis. Long-term savings goals may not seem like they should be a priority. However, these goals will be all the more attainable if you start saving for them right away. A retirement fund might only need a few dollars at a time to get you started, for example. You can contribute more easily once your income has increased, particularly as you will already be in the habit of doing so. If your job offers a 401(k), do not wait before signing up, especially if your employer will match your contributions. There are many reputable investment institutions online too, with Betterment being one of them. They have a calculator showing how your money will grow over time. Start investing in your 20s and you can easily be a millionaire by the time you retire.

Some saving goals should be pushed higher on your priority list, such as an emergency fund. This is a fund made up of about three to six months’ expenses, set aside in case of job loss, medical bills or another emergency. It might be seen as a personal insurance plan. Making a point to save this amount up over the first few years of your career could be of incalculable help later on.

You might also have personal long-term savings goals, such as moving into your own home, buying a house or a car or starting a business. If you work out how much your goal will cost, you can establish a time frame in which to save for it and automate a small payment towards it every month. If you do, it can be helpful to open up a separate savings account specifically for this one large goal.

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