With the New Year come resolutions. If you’re a recent college graduate, you’ve likely had a lot on your plate these last few months: starting a new job, moving to your own place, taking responsibility for bills, navigating financial products, and maybe even repaying your student loans. If you’re feeling a little overwhelmed by all of this new responsibility, and want to take charge of your finances in 2017, here are a few tips to help you start:
- Make a budget. This is really very easy: start by determining your monthly net, or take-home, pay. Then, add up your expenses. Use credit or debit card statements from the past few months to see exactly where you’re spending your money, so you don’t miss a category. Don’t forget to include a category for entertainment – it’s important to have fun too! Hopefully, you have more money coming in than going out each month. There are a variety of budgeting tools, from online to old school paper and pencil, to get you started. You can even develop your own!
- Review your current financial products, such as banking and credit cards. Are you paying fees or required to keep a minimum balance in your account to be eligible for free checking? Are you paying for overdraft protection (which you may not need if you use a budget)? Are you paying an annual fee on your credit card? If so, do a little research to see what other financial institutions are charging their customers, or not. It could save you money that you can use to start or increase an emergency fund.
- And speaking of credit cards, try to pay them in full each month. There is no benefit to carrying a balance, as interest rates on credit cards tend to be higher than most other financial products, including student loans. Paying them off will free up cash that you can use to achieve some of your other goals (maybe a vacation fund?).
- Emergency fund! Make sure you’re saving for those unexpected costs that will come up. Having cash on hand means you can avoid putting those charges on a credit card and carrying that balance for several months. Many financial advisors recommend an emergency fund equal to 3 – 6 months of your total living expenses. This might seem impossible right now, but it’s a goal you can be working towards.
- Save for retirement – it’s never too early. If your employer offers a retirement savings program, this is a great way for you to make contributions directly from your paycheck. The added bonus is that you’re reducing your taxable income, which means you’ll have more cash to work with throughout the year. If your employer matches some of your contributions, great! That’s free money to you that will help to grow your retirement savings. If your employer doesn’t offer a plan, consider opening a Traditional IRA or a Roth IRA on your own.
- Manage your student loans. Many new graduates have student loans that either just went into repayment or will very soon. If you think that your monthly payment is more than you can afford right now, contact your loan servicer to see what other student loan payment options are available to you. An income dependent plan might help to improve your cash flow. The great news about federal student loans is that you can prepay these loans at any time without a penalty, so if your salary increases in the next couple of years, you can apply additional payments to the principal to pay off loans faster with less interest.
Knowledge is power! Taking the above steps will allow your money to work for you instead of against you, so resolve to make 2017 the year that you take control of your finances. You’ll never regret it.