Post College Financial Planning (9 Best Tips)
After you graduate from college, starting your post college financial planning is essential.
There’s a good chance your major responsibilities during the last four years consisted of simply attending class and completing homework.
Now that you’re out in the real world – with a full-time job, a few monthly bills, and less free time – you must adjust to a new lifestyle.
Part of that involves making intelligent financial choices. Luckily, this can be easier and more manageable than you might think.
By taking certain basic steps now, you’ll avoid a lot of financial stress in the future.
Recent graduates, check out these post college financial planning tips to get you on track for a bright financial future…
You may not need life insurance now, but if you have a car, the odds are that your state will at least require you to obtain auto insurance.
Another popular insurance type to keep in mind is health insurance: Your employer may provide you with health insurance, but if they don’t, you’ll want to purchase it.
Renters’ insurance is also beneficial. Even low-cost renters insurance protects you from theft, damage to your belongings, and similar problems.
It can also provide financial compensation in circumstances where your place becomes uninhabitable.
This is always important, but it’s crucial during this early stage of your career.
You may rely on certain items, like a computer or phone, to contact potential employers to set up interviews.
On top of that, because you’re a recent graduate, the odds are good you don’t have a lot of money saved; if your place suddenly becomes uninhabitable, you need to know you have access to compensation to find a new home quickly.
Insurance is not a fun topic, but it’s one of those post college financial planning areas you must consider!
Decide On a Student Loan Payment Plan
The odds are that you’ll need to start paying your student loans back within six months of graduating unless you start pursuing another degree.
That’s why it’s crucial to explore payment options now!
Standard plans typically involve 10-year terms at fixed payment amounts.
Income-based plans can involve terms as long as 25 years, with payment amounts that vary from one year to the next. You may also consolidate loans with different interest rates from multiple years.
There is no one-size fit all solution. Assess your financial situation and determine what seems best for you. The U.S. Department of Education offers to help.
Student loans can last for a long time, so it’s one of the most critical post college financial planning tips so you don’t pay $10,000’s in interest or more!
Create a Budget
One of the most important things you can do after college is to set a budget!
After college, your financial responsibilities will increase drastically, yes, you will make more money, but you will have student loans, rent/mortgage, bills, etc…
You need a budget to save as much money as possible for your future!
List your income sources and all of your expenses, then do your best to minimize your costs to save money.
Thanks to apps and sites like Mint, creating a monthly budget has never been easier. Numerous free resources are available to people who’ve just graduated from college and need to track their spending closely.
The most important thing when budgeting is to be diligent. That small cup of coffee you grab on the way to work every now and then? Those types of costs add up.
Including them in your budget helps you save money for rent, bills, and savings.
Do your best to live frugally after college to save as much money as possible to plan for significant life events such as marriage, buying a house, having kids, etc…
Get a Credit Card
Yes, a credit card can lead to excessive spending. However, if you can discipline yourself, it can be an essential tool for building your credit.
You might have heard that credit cards are bad, but building credit is super important, and using a credit card is one of the best ways to build your credit.
This will be useful in the future, as a strong credit score helps you with everything from renting an apartment to applying for loans.
With a good credit score, you can apply for better loans with a lower interest rate since banks trust that you will pay off your loan quickly and not default.
Apply for a credit card and start making small purchases with the credit card to build your credit score; just make sure you pay off your balance every pay period.
If you don’t pay off your balance at every pay period, you’ll have to pay interest which is like throwing money away!
So, use a credit card to build up your credit score but don’t be wild and start spending on things you can’t afford to pay off each pay period.
Save Money for Surprise Expenses
Unexpected expenses are part of adult life; you’ll soon find this out.
Whether you’re faced with a sudden medical emergency, your car breaks down, or you need to find new accommodations after a pipe burst at your apartment, having at least $1000 saved – the more, the better, though – makes life much less stressful.
Things happen in life, and as an adult, there is no one to fall back on, so you need to have money set aside to cover these unexpected expenses.
The best thing to do is open a high-yield savings account so that your money earns some interest while sitting idle.
Check out CIT Bank’s Savings Connect account, which offers an interest rate of about 400x more than other banks!
This means that your money will grow over time which will help you keep up with inflation.
Having an account for these unexpected expenses is commonly known as an emergency fund, and it’s a super important part of your post college financial planning.
Check out CIT Bank and start building your emergency account immediately.
Start with any amount of money you can to fund your emergency account and build it from there!
Use Financial Services
You can only do so much to manage your finances, so one of the best post college financial planning tips is to utilize financial services to take some of the workload off of you.
We already mentioned using an app like Mint to help you with your budget, but there are so many other free apps that you can use to optimize your finances further.
I also recommend checking out cash-back apps such as Rakuten, Fetch Rewards, and Dosh to quickly get some money back for your purchases!
Cash back apps are free to use and can save you $100’s to $1,000’s easily, so there is no reason not to use them!
Another financial service that I recommend checking out and using is Rocket Money.
Rocket Money is an app that can help you optimize your budget by saving you money!
With the Rocket Money app, you can cancel unwanted subscriptions, lower your bills, set a budget, and automate your savings.
I highly recommend checking out Rocket Money to optimize your finances!
There are many excellent financial services that you can use for your post college financial planning; too much to list here, but the last service I recommend using is Empower.
Empower is an app for wealth management; it provides an easy-to-understand dashboard that lists all your income sources, expenses, and debt to show you an overview of your finances.
You will see your net worth in a clear dashboard, so I recommend checking out Empower.
Invest After College
You might have dabbled in investing in college, but after you graduate, it’s time to ramp up your investing!
Yes, this also means planning for retirement.
So, the first thing to do is that when you get a job to invest in the company-provided 401k or 403b.
These are tax-deferred accounts, meaning you invest money before tax is taken out, thus meaning you get to keep more of your money.
If you are working for a company that doesn’t offer a 401k or 403b, then look into an IRA or Roth IRA, which are individual retirement accounts.
The difference between an IRA and Roth IRA is the taxes; with an IRA, you invest pre-taxes and will have to pay taxes when withdrawing. For a Roth IRA, you invest after taxes but don’t have to pay taxes when withdrawing.
I recommend investing as much as you can in your retirement account so that it can grow over time with compound interest. Aim to invest at least 10% of your income for retirement.
Investing for retirement as early as possible will put you ahead of the game and set you up for a smooth-sailing retirement.
Besides retirement, you should also invest generally, not explicitly focusing on retirement.
This will help to build your net worth better!
If you want a hands-off approach to investing your money, I recommend checking out Wealthfront.
Wealthfront is a robo-advisor that handles all the complications for you with complex algorithms.
You will choose your risk tolerance, and Wealthfront will tailor a mathematical investing strategy for you and start investing for you!
Set up an automatic deposit to invest each month, and choose any amount you can afford.
Plus, if you sign up to Wealthfront with my link, you will get your first $5,000 managed for free!
Other great investing platforms I recommend checking out are Vanguard and Fidelity.
Focus On Building Your Income After College
After college, you will likely make an entry-level income, but moving up as soon as possible is essential!
Don’t get comfortable in one position or company; focus on making more money and advancing in your career.
There is a limit to how much money you can save, but there is pretty much no limit to how much you can make!
Work hard to get a raise and promotion or move on to a different company if you are stagnant in your current position.
The training and learning continue after college; you should continue to learn as much as you can in your field to advance further, which often comes with more money.
This is one of the best post college financial planning tips because increasing your income will help you achieve financial freedom!
Continue Learning Personal Finance
One of the best post college financial planning tips I can give you is to continue learning personal finance.
Reading one book or article online will give you only some of the knowledge you need on financial literacy.
So, continue your personal finance journey by learning everything you can to improve your finances further.
By reading books or personal finance blogs, you’ll learn strategies and methods that you can use to optimize your finances.
There is always room for improvement which is why continuing to learn is so important!
These are the best post college financial tips that you can use right now to improve your finances!
After graduating from college, you will have a lot of financial responsibilities, so it’s essential to have plans to take control of your money.
If you like this post, then I recommend checking out my posts on Budgeting After College (Finance Tips) and 13 Important Money Rules To Live By.
Have any other tips to add? What tip is the most life-changing? Let me know in the comments below!