Financial Tips for Recent College Graduates
Financial advice for college graduates
Congratulations, graduates! After completing your marathon of education, you are now embarking on a new adventure: post-grad life. It’s an exciting new chapter, but it can also be an overwhelming time for your finances. Maybe you need to start looking for a new place to live, applying for jobs, and paying off your student loans.
Southland is here to help you navigate through this new season of life. Here are some financial tips for you to consider:
Set your financial goals
As you enter the workforce with your first post-grad job, it’s the perfect time to think about your short- and long-term financial goals. Do you want to buy a new car? Move into an apartment? Buy a house in the future? Write your goals down in a notebook or on your phone. Keeping your goals in mind will help you make positive financial decisions every step of the way.
Establish a budget
Establishing a budget is the best tool to help you achieve your financial goals. First, track your spending. You can use various apps or a spreadsheet for this, or keep it classic with pen and paper. The 50/30/30 rule is a great budgeting method. With the 50/30/20 rule, you divide your take-home pay (your income after taxes) into the following:
- Spend 50% on needs: rent, groceries, utilities and minimum loan payments.
- Spend 30% on wants: travel, entertainment, eating out and shopping.
- Spend 20 % on savings and debt repayment: start an emergency fund, contribute to a retirement account (more on this later), and pay more than the minimum balance on your loans (beginning with your high-interest loans).
Take inventory of student debt
It’s important to have a firm grasp on just how much you owe in student loans. Begin by asking yourself these questions:
- Are your loans federal, private or a mix of both?
- How much do you owe?
- What are your loans' interest rates?
Once you have taken your student loan inventory, consider refinancing your student loans. With Southland, you have the opportunity to refinance and consolidate both private and federal student loans by setting up one convenient payment and potentially lowering your rate.
Start making payments on your student loans
It’s never too early to start making student loan payments. Even though most lenders offer a 6-month grace period on loan repayments after graduating, your loans are still accruing interest during that time. If you have the means to do so, consider getting into the habit of repaying your student loans as soon as possible. Paying your student debt consistently on time will also help you build your credit score.
Improve your credit
A good credit score is essential to accessing the best rates on loans, insurance and a mortgage. A credit score is the high 600s or above will help you receive loans with reasonable interest rates. Your credit score is determined based on the following percentages of your credit report: 35% payment history, 30% accounts owed, 15% length of credit history, 10% new credit, and 10% credit mix. Since payment history makes up the largest portion of your credit score, make sure to pay all of your loan payments on time every month. Visit Southland's page, Improving Your Credit, for helpful resources and tools.
Think about retirement
Even though retirement may seem far off, in order to maintain a comfortable living during retirement, you’ll need to start saving as soon as possible. Assume you’ll be retired for about 30 years and that you'll need about 80% of your current annual income for each year you are retired. Use Southland’s calculator to determine your retirement savings goal.
While the amount you calculated might seem daunting, you can save over time. If your employer offers a 401(k), set up an automatic contribution with your paycheck. If your employer offers a match to your contributions, aim to contribute at least enough to get the full match – it’s free money! Your contribution will be taken pre-tax, meaning that it will help you save on income taxes as well.
Even though you’re done with college, the learning should continue! There’s always more to learn when it comes to finances. Learning how to manage your finances will help you achieve your short- and long-term goals. Visit Southland’s financial education center to watch videos, take interactive courses, and read articles. You could also consider meeting with a financial advisor, reading books and following financial accounts on social media.
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