According to a Fidelity Investments study, about 70% of the class of 2013 is graduating with an average debt of $35,200. Figuring out a way to pay for college expenses might be far easier when compared to dealing with finances post-graduation, when you enter your first job and receive your first disposable income.
You’ll have to juggle plenty of expenses at one time, pay off debts on provincial Winnipeg loans for school and credit cards, insurance, retirement plans, stock options – not to mention everyday food and travel expenses. If not managed properly, it can quickly leave you in financial knots.
Here are a few tips to give you a jumpstart on navigating your finances when you are starting out:
1. Budgeting.
This one can be such a such a no-brainer, but it’s also the easiest to ignore and hence often is.
Carefully mapping out your budget and sticking to it is the most important thing you can do, not only in managing your post-graduation finances but at any stage in life. Budgeting can give you a feel for where you stand, how long it would take to pay off your debts and how much you have in hand to invest in your other pursuits. It is the basis for just about anything you plan to do with your money — if you want to do it right. Categorize your expenditures such as food, rent, travel, debts, insurance, etc, and continually keep tabs on them and be careful not to exceed your own estimated budget for each of them. There are many budgeting tools and apps you can use. Over time you will be able to come up with a system that works for you.
2. Pay off your debts and steer clear of more.
Plan to pay off your student loans or any other debts as soon as possible. Make it your first priority. Having debt looming over the horizon can sap your energy and become a hurdle in pursuing many things in your future, whether you want to take up that dream job or save up a down payment on a house. Save, pinch and save some more. Cut down your grocery list or stay at your parents’ place if you have to, in order to strike this one off the list. Paying off the minimum shouldn’t be enough. Regularly paying off your debts can also lead to reduced interest rates. Take advantage of automatic debiting in your e-banking options and set a good amount to be debited from your savings account every month. Make additions whenever you have a little extra to spare. This can greatly shorten the span of your student loans, leading to better opportunities in the future.Use your credit card only when you are absolutely sure you can pay it in full each month.
3. Retirement plan.
Think ahead of the curve and take advantage of your employer’s 401k, your company’s stock purchase options or retirement plan as soon as possible. You may think if you joined a company at an entry-level position that you won’t be there for long. Many people make the mistake of foregoing these options that can make a considerable bump in your savings, as most of these matches in contributions come at no cost to you and can have the added benefit compounding — not to mention that they are tax-deferred. You can always roll over the plan to a new employer if you decide to change jobs, or have it shifted to a private retirement account.
4. Emergency fund.
It is a good idea to have a separate, untouched account that you only access in times of emergency – a flat tire, a kidney stone or a crashing laptop. This can be as simple as a separate savings account, or you can save it in the form of a money market mutual fund. A good rule of thumb is to save up to the equivalent of 6 months of living expenses. The extra-prudent ones can go up to to a year, but that is up to you. The important thing is to have a emergency fund stashed up for a rainy day.
Navigating finances can be a tricky thing and might take awhile to get used to, but carefully planning out your finances will go a long way in leading a stress-free life at every turn.
When everything said and done, you do have to have your “Fun and life experience” tab opened up in the expense side of your personal ledger, and invest in it every now and then. Taking a break and relaxing in doing something that you personally enjoy can pay back rich dividends over the long term.
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