After graduating from school, many graduates entering the workforce will find that managing their personal finances can be a challenge. While managing your personal finances can be difficult, there are five financial recommendations that all graduates can follow, which will help to ensure they are able to save money and ultimately achieve financial freedom.
Start Saving for Retirement Early
The first financial recommendation to follow is to start saving for retirement early. While retirement can be up to forty years away for graduates, the time it takes to accumulate a lot of assets takes a lot of time. To ensure that you eventually have enough money to comfortably retire, you should start saving as soon as possible. By taking advantage of tax-advantaged retirement accounts, such as 401ks and IRAs, you can save even more money. You should attempt to save at least ten percent of your income and always take advantage of any employer-provided retirement contribution matches.
Build a Safety Net
When you first start working, it could be tempting to buy some personal items and pay off personal debts. However, before doing this you should ensure that you build a safety net. Your safety net should be equal to at least twelve months worth of living expenses. This will then be available to you in the event that you lose your job and have to support yourself without an income.
Pay Down High-Interest Debts
The third recommendation for graduates is to pay down any high-interest debts that they have. Many students end up graduating with a lot of credit card debt. While credit cards could have helped them to get through school, paying off these debts can be tough. Once you have saved up an appropriate safety net, you should next focus on paying off all of your credit card debt. Doing this earlier rather than later will help you to save a lot of money on interest charges over time.
Build a Budget
The fourth recommendation for graduates is to build a personal budget and stick to it. Graduates who are entering the workforce need to learn to stick to a financial plan, which will include setting up a budget for how much money can be spent each month on fixed expense, such as rent and car insurance, as well as discretionary expenses, such as dining out. When building a budget, it is important that it is realistic and includes reserves for saving money, paying down debt, and achieves both short-term and long-term goals.
The fifth recommendation for graduates is to look for ways to invest. While most graduates may feel that they are already financially strained, graduates should look for ways to invest their money when they can. Graduates should look to invest their money in well-managed and regarded mutual funds and blue-chip stocks. While it can be tempting to invest in more speculative stock investments, the amount of these investments should be limited to a small percentage of your portfolio.
In conclusion, managing personal finances can be a big challenge for recent college graduates. While it can be overwhelming, there are several tips that all graduates can follow, which will make it easier for them to save money and manage their finances.