Congratulations! Graduating from college is an incredible accomplishment and takes a ton of work. You may have already lived on your own while you were at school, but as you transition to the workforce, questions about finance are inevitably going to pop up. The good news is that knowing where to start and how to focus your energy is often the hardest part. To help you onto a path toward a successful post-college life, here are four items to put on your to-do list as soon as you graduate.
1. Figure out your cash flow
After graduating from school, it's important to think about how you'll support yourself. Many college graduates don't have jobs right away, and that's okay, but it makes sense to consider how to afford rent, food, and bills. Some graduates work part-time jobs while searching for full-time work, while others live with their parents or ask for their help in subsidizing the costs of post-college live. Still others use credit to support themselves until they have a steady income.
2. Understand your student loans
If you graduated with student loans, now is the perfect time to learn more about them. List out each of your loans, plus the bank with whom you have the loan, monthly payment amount, interest rate, total loan amount, and the loan's duration (how long it will take you to pay back the loan). Also, make a note of whether the loan is a federal loan or a private loan. If it is a federal loan (backed by the U.S. government), you will most likely have a grace period of six months before you must begin making monthly payments. Whether your loans accrue interest during the grace period depends on if they are subsidized or unsubsidized; you can call your loan service provider to be sure which type yours are. If at all possible, you may want to make payments—even if they're just interest-only payments—on unsubsidized loans, since any unpaid interest will be added to the value of the loan at the end of the grace period. If you have private student loans, you'll want to check with your loan provider regarding grace periods and interest accrual.
Most federal loans will come with a standard repayment period of ten years (repayment periods for private loans vary), but this isn't necessarily your only option. If your student loan payments are too high, you can switch to one of several income-driven repayment plans which will lower your monthly bill and extend the length of your loan. This means that you'll likely pay more in interest over time, but it can be a big help if you want to save more money now. If you plan to go into a career where you'll have your loans forgiven, you'll also need to switch to one of these plans and fill out an Employment Certification form once you start.
Alternatively, once you've entered the workforce, you may want to consider refinancing your loans. Refinancing means replacing your old loans for a single loan that has a new interest rate, and different (sometimes better, depending on your lender) borrower protections. A lower rate could save you thousands of dollars on your student loan payments over time.
3. Find a budgeting system that works for you
Making a budget may sound intimidating, but anyone can do it. First, you can track your monthly cash flow, which is the amount of money coming in and the amount of money that you spend. Once you've done this for a couple of months, you should start to get an idea of how much you spend and save each month.
Once you've tracked your expenses, you can plan for the future. If you spent $250 on food one month and $280 on food the next, you can set a monthly target for food that falls somewhere in that range. This practice will help you create reasonable targets in each category. Also remember to take into account expenses that happen only periodically (such as a car insurance payment every six months) and leave extra room in your budget for emergencies and incidentals. Refer to your new budget as needed to see whether you're staying within your spending targets.
4. Have faith and invest in yourself
Taking your first steps after graduation may seem tough, but just like you were ready to leave high school and start college, you're ready for the "real world." Trust your instincts, but also realize that any mistakes you might make aren't permanent. You'll look back at yourself in ten years and be impressed by how much you've grown, not to mention surprised at how different a place you're in now compared to where you started.
You'll never regret investing in yourself, whether that means learning new skills or trades, building your academic and professional strengths, or simply taking the time to work on your own happiness. One great way to do this? Seek out and read a few personal finance books written specifically for young people, such as Broke Millennial by Erin Lowry, The Financial Diet by Chelsea Fagan and Lauren Ver Hage, and I Will Teach You to Be Rich by Ramit Sethi. These aren't the same old books that your parents and grandparents read, and they will give you salient advice on ways to invest in yourself and your career.
Use these steps as guidance in the months following your graduation, and you'll be well on your way to a successful financial future. To learn more about saving money by refinancing your student loans after graduation, click here.