If you’re out of college and working your first job, you’re probably feeling really independent right now. That’s a good thing. But alongside that independence, for many of us, comes debt. That’s one downer of being a responsible adult – having to pay your bills. But it’s important to remember that you should control your money and you should never let your money (or debt) control you. So on this July 4th, after you do the required amount of partying, beer drinking and firework watching, think about declaring your independence from debt by adopting these seven smart money strategies.
#1 Learn to Budget
If you’re not already operating under a budget, you need to get one ASAP. Even if you think you’re too broke to need a budget, you should know that’s actually when you most need one. There are a bunch of different methods, but the 50/30/20 is a great choice because it’s flexible, not too austere and easy to get started with. Check out this recent article on how to budget using this principle.
#2 Avoid Accumulating More Debt
Once you start raking in the big bucks (or middling bucks) from your first post-college job, your thoughts may turn to the stuff you want. But slow your roll. Taking on a new car loan and racking up credit cards is not the way to establish your grown-up money habits. Instead, drive your clunker, opt for a cheap apartment with a roommate and use the cash this frees up to create a better financial future.
#3 Set Up an Emergency Fund
One of the things that can ruin your finances is a small hiccup. An unexpected car repair or medical costs, a gap in employment or any other out-of-the-blue event that either incurs a sizeable expense or cuts your income can cause a chain reaction that can send your finances spinning out of control. Save up enough money to cover a few months of living costs to buffer yourself against the unexpected.
#4 Sign Up for Your Company’s 401(k)
If your employer offers a 401(k) with matching funds, you’re losing money by not participating in the plan. If you can’t afford to max out the annual amount, at least max out the employer match. For instance, if your employer offers a 50% match on up to 6% of your pay, and you’re earning just $30k with 5% annual raises, you can set aside $620k! The more you earn, the more you’ll have. Get started!
#5 Fast Track Your Student Loans for Payoff
Most grads these days have student loans to cope with and even though you may be able to score a lower payment via IBR or PAYE, if you can afford your loans, you should take the opposite approach and pay more on them as often as you can. After you have your 401(k) set up and an emergency fund established, devote your extra money to fast tracking your student loans for payoff. Read how here.
#6 Keep Your Cheap College Habits
While in school, you probably learned to live on Ramen and low-cost beer. No need to stop those cheapskate habits once you’re out of school. If you carry on with cheapo practices, you’ll be much better off financially in the long run. Now is not the time to develop expensive habits – pay your student loans, build up a nest egg and live modestly and you’ll never have financial problems.
#7 Set Financial Goals
You don’t want to float along without financial purpose. Having goals will keep you from wasting money on dross. Want to own a home? Set yourself a deadline and work toward it. Want to be student-loan free? Make a plan to get shed of it and then do it. Establish financial goals and work toward them. This will motivate you to spend wisely, knowing what your future dollars will be doing for you.
If you have student loans, Tuition.io’s free student loan tool can help keep you on track and working toward shedding your school debt. You can see all your loans in one dashboard, track your progress toward payoff, check out the impact of making additional payments or of changing your repayment plan.