For many, college marks an important step on the path to adulthood. Some college students begin to develop good financial habits in school. But since money management isn’t usually on the final exam, we understand if you spent more time in the lab than you did on personal finance.

If you (or perhaps someone you know) have recently graduated from college or are just about to graduate, here are six financial steps you can take to help set yourself up for long-term financial success.

1. ASSESS YOUR STUDENT LOANS

If you have student loans, you’re certainly not alone: 55 percent of Americans under 30 took on some debt to finance their education. And it can be easy to graduate without fully understanding exactly how much you owe, who you owe it to or how much it will take to pay your loans off. Taking the time to audit your student loans will give you a clear picture of your post-college finances.

If you have federal student loans, you can use the National Student Loan Database (NSLD) to confirm your obligations. You can also contact your school’s financial aid office or check your free credit reports.

Once you’ve made a list of your student loans, it’s a good idea to keep track of all of the relevant information — your lender/servicer, loan type, principal, interest rate, monthly payment, etc. — in a single place, such as a student loan spreadsheet you can download or an online dashboard.

2. UNDERSTAND YOUR STUDENT LOAN GRACE PERIOD

If you have federal student loans, you’re likely entitled to a six-month grace period after you graduate or drop below half-time student status before you must begin making payments. Similarly, some private lenders also offer borrowers a grace period, though it is typically shorter in duration. During this time, you’re not required to make minimum monthly payments on your student loans. However, most loans continue to accrue interest during the grace period, so paying enough to avoid the interest from increasing the principal amount you owe could help you pay off the loan more quickly.

Understanding what grace period may be available to you can help you plan whether to defer your payments if you’re not yet in a position to make them — or work to get ahead by making payments before the interest you will owe starts to grow. Also, note that all federal student loan payments have a grace period through September 2021 as part of COVID relief.

If you find that your monthly payment is too high, you can explore repayment plan options to help you pay down your student loans strategically. Or, if you work for a federal, state, local, or tribal government or not-for-profit organization, you may qualify for public service loan forgiveness. A qualified student loan professional can help you determine the optimal repayment plan based on your specific circumstances.

3. CREATE A BUDGET

A cornerstone of financial planning is creating a monthly budget to help you keep track of your money. By understanding how much money you bring in on a monthly basis and assigning it a job to do, you can do a better job ensuring that you’re spending on the things that are most important to you.

Your budget should include your:

  • Take-home pay, from all income sources
  • Fixed costs: groceries, rent, utilities, minimum debt payments (car, student loan, credit card), insurance, transportation costs, etc.
  • Discretionary spending, such as memberships, dining out or entertainment; and
  • Financial goals, such as building an emergency fund, paying insurance premiums or contributing to a retirement account

If you find that you are unable to afford everything in your budget, this process can help you better prioritize your spending to see where you can realistically cut back.

4. PREPARE FOR THE UNEXPECTED

Life is unpredictable. One accident, severe illness, job loss or other unexpected expense can blow a hole in any budget. That’s where an emergency fund comes in. Aim to set aside at least six months’ worth of expenses in a savings account. Having this money means that an unexpected trip to the vet or a crucial car repair won’t derail the other money goals that you just set.

If you’ve just started working, the good news is that you can start small. Setting aside as little as $100 each month in your emergency fund will net you $1,200 in one year.

In addition, you will want to consider protecting your paycheck. Disability insurance can provide you with income if you sick or hurt and are unable to work for an extended period of time. Though you may think it’s too early to be thinking about life insurance to protect your loved ones and fortify the future you are planning, the truth is, the younger you are, the cheaper your premiums are likely to be.

5. START SAVING FOR RETIREMENT

Your golden years may seem eons away right now, but the sooner you begin saving for retirement, the better. That’s because of the power of compound interest, which basically means the money you save will earn you more money over time. Even a small amount saved in your 20s can grow to a very large amount by the time you’re ready to retire.

The best way for you to start saving for retirement is to begin investing in a retirement account, which can provide powerful tax benefits. If you’re employed, then you may have access to a 401(k) through your employer, and your company might even offer to match a percentage of your contributions — which is free money. If you don’t have access to a 401(k), you can still save for retirement by opening an IRA.

A financial professional can help you prioritize your savings goals and payment obligations to make sure you’re on the right track.

6. SET SOME MONEY GOALS

When you think about it, money is really at the center of so many things you’re going to want to do in life. Whether that’s traveling to see the world, settling down and buying a home someday or maybe even just buying your first new car, writing down goals for your money can help you see the big picture.

Be as specific as possible by naming your goals, selecting a dollar amount that you are working toward, and specifying a time frame for each. Then allocate money in your budget for each and periodically assess and adjust, if necessary.

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