College graduation is a time when your hard work over the past several years will pay off. And the next step is something you are likely hoping will happen as soon as possible – a paycheck from a full-time job. Once this income starts coming in, there are a few things you should do with it before you are tempted to spend it.
Start Taking Care of Debt
Your first debt priority should be debt that has a high interest rate. Getting rid of that can free up extra money for investing and saving. If you are only making the minimum payments, you will not make that much progress toward the actual amount. Credit card debt is one example of debt to get out of as soon as possible. It’s also a good idea to make sure you are dealing with student loans. In fact, you might need to start making at least the minimum payments soon after graduating college. However, just like with credit card debt, only making the minimum payments will leave you unable to make that much progress toward the principle. You might look into getting a student loan refinance, as it can lower your monthly expenses and help you make progress toward your financial goals.
Build a Budget Based Off Your Goals
Understand where your money is going to be spread out as it comes in. It’s a good idea to make sure you set aside something for your savings and expenses first so you don’t run out of money at the end of the month. Costs that change should be factored in as well. About half of your money should go toward needs, such as rent, food, and transportation. Put around 30 percent toward savings and investments. About 20 percent can be fun money, which might go toward new things you don’t have to have, such as travel or extra clothing.
Take Advantage of Any Retirement Matching
If your full-time position offers matching on retirement contributions, it’s important to not leave this free money up for grabs. Look into how much you need to contribute in order to receive additional funds into your retirement account, and take advantage of that. You can often get a better return on retirement funds than you can on investing it in other locations.
Create an Emergency Fund
A budget helps you understand where each dollar is going so you can easily pay for your living expenses. But what if you have an out of budget expense or no longer have an income? This is where an emergency fund will come in handy. Without having this extra financial protection, you could end up going into debt when these things come up. Start with a few thousand dollars if you can, and gradually build it up to about six months of living expenses. If your income is variable or you don’t feel your job is that stable, consider building up an even larger fund. It can give you peace of mind when a financial emergency does happen.