If you are about to graduate, or have recently graduated from college, then congratulations! You are about to enter a whole new world of freedom...and responsibility. Don't worry though, you can still enjoy your freedom. Especially if you take control of your responsibilities, rather than letting your responsibilities control you,
Here's an example: saving money. It sounds like one of the boring and possibly even painful responsibilities that goes with being an adult, but it's actually a key to having more freedom in the long run. People who save money early will have more options in a few years, especially when it comes to what to buy, when to take time off, or whether to pursue additional education.
Here are some things a person fresh out of school can do to get on the path to freedom by saving money:
Don't wait around for the perfect job
You've got your degree, and you've got high hopes for a career that's exciting and creative, or maybe one that involves lots of money and power... and then you wake up. You may eventually have that kind of career, but almost nobody gets a first job that is all of those things.
Don't stand on the sidelines waiting for the perfect job. Get in the game--gaining some experience will make you more attractive to other employers, it will give you a chance to work your way up within that first company, and crucially, it will start earning you some money. You're going to need it.
Use those math skills--make a budget
Ever wonder why you had to take all those years of math? Well, now you can make it pay off. Once you know how much you are going to be making, you'll know how much you can spend. Remember though, you can't spend all your income. Check out your first few paycheck records to see how much is being taken out for taxes, health insurance, etc. The remainder is your take-home pay. Set a budget that represents no more than 90% of your take-home pay. You'll need the remainder as a cushion against emergencies, and so you can start saving money.
Set up your basic bank accounts
Once you have a little money, you'll need a bank account. Actually, you should set up two -- a checking and a savings account. Checking accounts give you more immediate access to your money, while savings accounts generally pay higher interest rates.
When choosing a checking account, pay special attention to fees--especially any monthly maintenance fees. You'll also want a bank with plenty of ATMs in your area, because banks often charge extra for using another bank's ATM.
For savings accounts, focus on finding the best interest rate. Though you may get the best overall deal if you keep both your savings and checking accounts at the same bank.
Once you have these accounts set up, keep enough in your checking account to meet your short-term needs (see, your budget is already coming in handy!) and put the remainder in savings. Keeping a separate savings account not only allows you to earn more interest, but it should help reinforce your budget discipline.
Master your plastic
That checking account probably came with a debit card. You are probably also receiving new offers for credit and debit cards on a daily basis.
Plastic can be your friend, but plastic can also be your enemy. This is where life can get tricky. Here are a few simple rules for making plastic work for you:
- Keep track of every debit card transaction, and how it affects your checking account balance. If you overdraft your account, you will be charged overdraft fees--and these may amount to several times the amount of your overdraft
- Only use debit or credit cards for things that are within your budget. Those cards aren't really magic--they don't give you any more money than you had before
- Don't charge more on a credit card than you can pay off that month. Carrying credit balances over from month to month is one of the worst financial habits you can get into. It's an expensive way to borrow money, and has led millions of Americans into serious trouble
Treat your information like a secret
Few people can keep a secret--especially in the age of YouTube. However, you must keep your financial information--checking and savings account numbers, social security number, etc.--100% private. Otherwise, you may be giving money away to people you've never even met.
Start a bill-paying routine
You'll start to live your new life, and the next thing you know, bills begin to accumulate. Here's the thing--don't let them pile up. It's a drag to tackle a big pile of them at once, and if you're late, you'll end up paying some hefty fees and taking a hit to your credit rating--and that's something that can really cost you.
You don't have to pay every bill as it comes in, but once a week it's a good idea to clear them out of the way. If you're comfortable with direct payment arrangements, the service can ensure that bills are paid automatically.
Oh yeah... about those student loans
You might have forgotten them, because most student loans give you a grace period after graduation. But then, like Freddie Krueger, they pop back up again.
Here's what you do. If you haven't already, factor these into your budget. Pay them on-time, and if possible target the ones with the highest interest rates for early payment, because this can save you money in the long run.
If you get into a situation where you can't make a payment, don't just hope it will go away. Contact the loan company, and see if you can work something out. Especially if you've had a good payment history up to that point, they may give you more time, or even a lower interest rate. However, be wary of trying to convince anyone to forgive a loan. This is not as good of a deal as it sounds. It can have tax consequences, and really mess up your credit rating.
If you're a little intimidated by all this, don't be. Remember how scary your first day of high school was? Remember how tough college seemed when you first arrived? You not only met those challenges, but after a while they probably became routine and even enjoyable. Simply follow the steps described above, and saving money can become a pleasant routine as well.