It’s that time of year. Universities all over the globe are sending their 2016 graduates out into the “real world. Unfortunately, post-grad life comes with some serious financial struggles. With unprecedented amounts of student loan debt, low wage growth and the new era of needing a subscription service for everything, balancing income and expenses gets trickier all the time. This makes proactively planning for your future even more important.
Make your transition to post-college life a little less painful with these tips.
1. Build up a rainy day fund.
This one is pretty simple. Ideally, before you even invest any money in the market, make sure you have enough cash set aside to cover three to six months’ worth of fixed expenses. This money should be kept in a separate account than the one you pay your bills from every month.
2. Set “SMART” goals.
Most people have probably heard of SMART goals. (If you haven’t, this stands for Specific, Measurable, Attainable, Realistic and Timely.) Setting this type of goal for yourself is a great way to put on paper exactly what you are working towards. Whether you want to aggressively pay off your student loan debts, save for a down payment on a home or take a vacation, this will keep you motivated and dedicated to making your goal a reality.
3. Create a budget … or whatever works for you.
Fortunately, you really don’t need to know anything about budgeting in order to create an effective one. A quick search will provide you with a multitude of spreadsheet templates and even web and smart phone apps. If you don’t like traditional budgeting, give reverse budgeting a try. This method uses automated savings to reach your goals and lets you spend the remaining money on living expenses.
4. Save a little something extra.
The key word here is something. It’s important to figure out how much you can comfortably set aside from each paycheck after your regular living expenses are taken care of.
Textbooks will suggest saving around 10% or more of your gross income if you are between ages 25 to 35, but—depending on your debts, income, and living expenses—this may or may not be feasible. A good starting point is to contribute enough to your retirement plan to take full advantage of the match your employer provides. Although, the more you can put in your retirement plan now, the more time you give those investments to compound and grow.
All that being said, enjoy the ride! It takes years of hard work to get an education and start a career. Your future should be a priority, but it’s not always worth depriving yourself of experiences you can have today out of the fear that you won’t be prepared for what’s coming. You have the power to put yourself in the position to reach your goals, but even the best plans will need adjusting when life decides to throw you a curveball.