Congratulations to the Class of ’23, it’s graduation season! For all you readers who will be donning caps and gowns soon (or for those who have a graduating family member) our partners at GreenPath Financial Wellness have compiled some money management action items that can pave the path to future financial wellness. While everyone’s financial circumstances are unique, sometimes it helps in knowing where to start.
Build a budget.
Creating a budget is the foundation of effective money management. Start by tracking your income and expenses for 30 days. Most finance apps provide a visual breakdown of spending trends with suggestions on where to save. One common budgeting method? Allocating 50% of your income towards necessities like rent, groceries, and transportation, 30% towards discretionary spending, and 20% towards saving. Depending on where you live, this rule may be challenging to follow. Consider your own financial picture and determine how you might include savings as a regular part of your budget.
While graduation is a season to celebrate (and you should!), this is a great time to practice mindful spending, especially if college–and the accompanying costs–are going to be part of your financial picture in the coming months. Differentiate between wants and needs and make an effort to only buy items you can afford to pay off promptly. This will help you avoid the accumulation of credit card debt in the future.
Set up a checking account.
If you haven’t already crossed this one of your financial bucket list, graduation season is the perfect excuse to do so. Opening a checking account is the first big step towards financial independence and top open one you’ll just need a few things on hand:
- Proof of mailing address
- Your social security number
- Government-issued ID (like a passport or driver’s license)
Important to note: you can open your own account once you turn 18. If you are under 18, you’ll need to have a joint account with your parent or guardian or set up a high school account with your financial institution.
If you’ve decided to pursue higher education, it literally pays to do your research when taking on student loans. Consider federal loan options first, as they often offer more favorable terms and interest rates. Take time to read the fine print on repayment options associated with your loans and create a plan to pay them off efficiently. Student loan obligations can lead to long-term financial burdens (not to mention personal stress), so your future self will be glad you did your homework!
Establish healthy credit.
Building a positive credit history early on lays the essential groundwork for solid financial health. Start by finding a credit card that fits your needs: do you value cash back rewards? A card with no annual fees? Consider using a secured credit card which requires an upfront cash deposit—usually equal to your credit limit—that you draw from when making purchases. Make payments on time and keep your balances low. Building good credit will benefit you when applying for loans, renting an apartment, or even securing certain job roles.
Insurance is a crucial aspect of financial planning that many recent grads may overlook. Protect yourself and your assets by obtaining health insurance, renter’s insurance, or car insurance as needed. While it may seem like an additional expense, insurance provides a financial security buffer in case of accidents, illnesses, or property damage. Take the time to research and compare different insurance options to find coverage that suits your needs and budget.
Create an emergency fund.
As of this writing, more than 53% of Americans don’t have emergency savings. Building an emergency fund is a vital financial safety net. If possible, aim to save three months’ worth of living expenses in a separate savings account—and if this isn’t possible just yet, don’t sweat it! You can always start with smaller deposits. This fund will help protect you during unforeseen circumstances like medical emergencies and provide some peace of mind.
Embrace financial guidance.
Embracing independence is exciting and potentially nerve-wracking since the post-graduation period brings more financial burdens and considerations. Talking about money doesn’t have to be intimidating or loaded with jargon. Whether you need guidance on student loans or want to start chipping away at your money goals for the coming year, the empathetic team of counselors at GreenPath are NFCC-certified and excited to help make it happen.