By Charlestien Harris, Retired Financial Coach at Southern Bancorp
Last week, I spoke to high school graduates. This week, I want to speak to college graduates, most of whom are headed into the workforce.
After earning a college degree, it’s time to face reality. Many graduates are living away from home and managing their own finances for the first time. Here’s how to tackle your finances responsibly while navigating a new career and enjoying your newfound freedom.
- Establish credit and use it wisely.
Having a credit card is not a bad thing if you don’t live beyond your means. You only need one major credit card, which you can use at most retailers to purchase nearly any product or service. In addition, you should learn how to obtain and monitor your credit report. You can get a free copy of your credit report from all three credit bureaus by visiting www.annualcreditreport.com.
- Learn to save money automatically.
If you ask the average person, they will tell you that saving money is not easy. However, there are simple ways to make it easier. You can use payroll deductions, set up automatic transfers from your checking account to your savings account, or even save spare change in a jar. The key is to avoid spending the extra money you have left over.
- Make a habit of paying your bills on time.
This will help you avoid costly late fees and protect your credit score. Even a $10 late fee adds up to $120 over a year. Late fees are assessed when you miss a payment deadline, and repeated late payments can appear on your credit report.
- Clean up your social media profile.
You may wonder why this matters, but it is very important. Employers often review social media profiles to learn more about potential candidates. What they find could affect your chances of getting hired, as well as your potential salary. Your income, in turn, determines your ability to cover your monthly expenses.
- Begin planning for retirement as soon as possible.
It may seem early, especially if you’ve just started working, but planning for retirement is critical. Saving early allows you to benefit from compound interest, which is interest earned on interest over time. Research the options and financial products available to you so you can take full advantage of this opportunity.
- Learn to cook and clean for yourself.
Many college graduates are used to ordering food through delivery services, but eating out regularly can quickly drain your budget. Spending $5 a day, seven days a week, adds up to $35 per week, $140 per month, and $1,680 per year. Learning to cook can save you a significant amount of money. Cleaning services can also be expensive, so doing it yourself can help you save even more.
- Beware of borrowing to buy items that lose value.
Cars, furniture, appliances, and tech gadgets all depreciate over time. When you finance these purchases, you pay interest on items that are losing value. There are instances where borrowing makes sense – such as buying a home, starting a business, or pursuing graduate school – because these investments may increase your net worth over time.
- Anticipate emergencies.
Emergencies happen, often when you least expect them. A burst pipe or car trouble can disrupt your budget if you don’t have an emergency fund. It is commonly recommended to save three to six months of living expenses, although some experts now suggest keeping 12 to 24 months of income in reserve. Don’t let that number intimidate you – start small and build over time. Only use these funds for true emergencies.
Good money management is essential to your financial well-being. By developing smart financial habits early, you can avoid unnecessary stress down the road. Hopefully, you won’t need another lecture from your parents to stay on track. Instead, follow these practical tips designed specifically for recent college graduates.
For more information on this and other financial topics, you can email me at [email protected] or write to P.O. Box 1825, Clarksdale, MS 38614.
Until next week – stay financially fit!
