Key takeaways
- Build a budget
- Refinance your student loans
- Set up a high-yield savings account
- Save for retirement
- Use credit wisely
Free food, late class times, and wearing sweatpants almost every day are just a few things I miss about college. That said, while entering the workforce can be overwhelming, at least it comes with a steady income.
You’re probably making more now than you ever have before. Check out these 5 tips for recent college graduates to learn what do with your money so you can effectively save, spend, and splurge.
1. Budgeting after college
You may be surprised at how expensive life really is; I know I was. Just remember, every dollar counts and the better you organize your paychecks, the more money you’ll be able to save. The50/30/20 budgeting ruleis a simple way tobreak down your monthly income into the appropriate areas. It indicates that 50% of your earnings should go toward your necessities, 30% toward your wants, and 20% toward your savings. By using this budgeting technique, you’ll be able to cover your monthly expenses, splurge reasonably, and save for the future.
Try out the 50/30/20 Calculator
2. Make your money work harder
Setting up ahigh-yield savings accountis a crucial step when you start your first job. If you’re using the 50/30/20 rule, set up 20% of your paycheck to be deposited directly to this account. By doing this, you’ll be more likely to resist the urge to spend more than you should. Instead of splurging on a trendy top that’ll be out of style next season, you’llbe prepared for emergenciesand large future purchases. If you took advantage of all the free pizza opportunities on campus, you might already have savings available. Keep in mind, the higher the rate on your savings account, the more cash you’ll generate just by keeping the funds in the account. In other words, you’ll be paid to save!
4. Save for retirement
As you’re settling into your new role, there’s a good chance you’ll learn about the retirement options your employer provides.Saving for retirement might not seem like a priority in your early 20s,but when you’re 65 andtraveling the worldin all your free time, you’ll be happy you did. Openinga 401(k) or a Roth IRA accountare two options to save for retirement. Most companies will match between 4-7% of your salary, so at the very least, try to put in the employer match. Do yourself a favor and take the free money!
5. Reap the rewards of cash-back credit cards
Establishing good creditis one of the smartest things you can do early on in your career. You’ll be more likely to qualify for a mortgage, auto loan, and other lending options you apply for in the future. If you use yourcash-back credit cardfor small purchases you would typically pay for with cash or a debit card, you’ll be able to stay on top of your payments and reap the rewards of your card. For example, if you use your credit card to purchase your morning coffee, you’ll be rewarded by receiving a percentage (usually between 1-4%) of what you spent at the coffee shop. These rewards can be redeemed for cash and can go toward paying off the balance on your card. You can easily make payments through online banking within 30 days of purchasing to avoid paying interest. While this isn’t the traditional use of credit cards, it’s certainly an effective way to use them!
Ready for your future?
While earning a steady income is exciting, it’s important for you to save now so you’re prepared for the future. By making a few simple adjustments and planning accordingly, you’ll be able to spend in the present while saving for the future.
