Start Wealth Building Habits Now
Guest contributor; Anton Ivanov
College graduation is fun and exciting. New grads are finally done with their education and are eager to embrace new opportunities. But graduation can be a very stressful time as well. Along with finding a new job, moving and adjusting to post-college life, new grads often face financial problems. With all the stressors of entering adulthood, these money saving tips for new college grads will ease the transition.
Many young people graduate with tens (or even hundreds) of thousands of student loan debt, have little or no savings and poor financial habits. But that doesn’t mean they can’t change their financial situation for the better. If you are a recent college graduate, whether you have private student loans or not, following these 5 essential money saving tips will help you build a solid financial foundation.
Follow these money saving tips for new college grads to ward off financial problems!
1. Start Saving Early
This is my absolute favorite money saving tip for new college grads. Saving for emergencies or retirement may not be your most pressing concern. But it’s dangerous to put your saving efforts on the back burner. Every month and year lost can mean thousands of dollars less in your retirement account. And a lack of an emergency fund may have a big negative impact on your life and finances if you are not prepared.
If you employer offers a 401k plan, run, don’t walk to sign up now. Let the power of compounding start immediately.
Make a plan to save a portion of your paycheck each month right after graduating (or earlier, if possible). Be sure to pay yourself first – save money before your other expenses eat away at your paycheck. The earlier you start saving, the wealthier you will ultimately become.
(Barb’s comment; I opened an IRA and started saving for retirement at age 23 and am sitting pretty as retirement approaches! A little bit of saving goes a long way!)
2. Control Your Spending
You may have gotten used to spending every dime of your part-time job’s pay in college. Now that your paycheck is much bigger, thanks to your full-time employment, you may be tempted to do the same. After all, all your friends are buying nice cars and expensive clothing, so why should you miss out on the fun?
(Barb’s comment; Because you will look back on that expensive car with disgust when you are eating beans in retirement!)
You can’t save money if you spend it all. If you want to reach your financial goals, such as become debt free and have a comfortable retirement, you need to have a budget. A budget will help you see where your money is going so you can figure out where your weaknesses lie. You don’t have to eliminate your expenses all at once – cut back a little at a time.
(Barb’s comment; Buy a coffee maker, brew a thermos full of coffee, bring it to work and save $20-$30 per week!)
3. Every Little Bit Counts
Even after you eliminate unnecessary spending, you may not have much to save. This could be because your starting salary isn’t the greatest, or because your student loan payments take up a significant portion of your pay.
Don’t let this discourage you from saving altogether. Every little bit counts – if you invest just a $200 a month for 40 years, you will have close to $525,000 (assuming an annual yield of 7%). Don’t be afraid to start small, and be consistent and disciplined. As your income grows and debts are getting paid off, you will have an opportunity to save more.
4. Emergency Fund is Key
Your emergency fund should be your first savings goal. Why? Because an unexpected event can happen to you at any time, no matter how young or healthy you are. If you are not financially prepared to handle an emergency, you will likely be forced to take out a loan to cover its costs.
Set an initial goal to save at least 6 months worth of expenses. Put that money in a high-yield savings account and don’t touch it unless you absolutely need it. Don’t be afraid to save more in the future as your financial situation changes (you start a family or have to support aging parents). And don’t forget to replenish your emergency fund after you dip in to it.
5. Don’t Forget About Debt Repayment
If you have student loans, credit card or other types of debt, create a debt repayment plan to get rid of it as quickly as possible. Loan and credit card payments cut into your income and limit your ability to save. The sooner you get out of debt, the sooner you will be able to save more money.
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Make a list of your existing debts and pick one to focus on. It’s better to pay off high interest debt first (this will usually be your credit card debt). As your debts are getting paid off, roll over your debt repayment money into the next debt, then the next, and so on. This proven method of debt repayment will help you become debt free the fastest.
It’s also important to realize that you will not succeed at paying off your debt if you don’t stop accumulating more of it. A debt-free attitude will serve you well for the rest of your life.
The key to all of these money savings tips is being consistent and disciplined. If you succeed at that, you will build a strong financial foundation and will easily reach your financial goals.
What money saving tips do you have for new college grads?
Guest contributor; Anton Ivanov is an aspiring financial writer, successful investor and zealous entrepreneur.
Updated; August 26, 2018
This article is sponsored content.