5 Financial Steps for New College Graduates

Graduating from college is a joyful and great experience, which allows graduates to enter the job market for their specific fields. However, depending on the college debt and market conditions, new college graduates should prepare to avoid financial hardship. As a new college graduate, you can improve your financial status with these five financial steps.

Make a Budget

Creating or updating personal budgets is of outmost importance upon graduation. Budgets are effective ways to control personal expenses and income, which should be set on a daily, weekly, or monthly basis. There are even online tools specifically created to manage budgets, set financial goals, and track expenses.

You should know that paychecks have added costs like taxes, 401k contributions, Social Security, which can substantially lower your available cash. Track your money and stay on top of your finances with the right budget.

Start Saving

It?s estimated that new college graduates have an average debt of $25,000 each. Paying debt is important, but it?s also necessary to start saving after graduating. For example, if you start saving $5 per day by the age of 25, you could have $500,000 saved by the time you reach 65 with an 8% annual interest. However, if you start saving by the time you are 35, these savings are reduced to less than half to $223,000. Use your budget to manage both debt payments and savings to plan for retirement, emergencies, or leisure activities.

Take Full Advantage of Roth IRAs

Roth IRA provides some of the best investment venues for employees under the tax-free and employer benefits. The sooner you set up a Roth IRA, the more earnings and interests that you will have over time. In addition, if your job offers 401k plans, take full advantage of the matching contributions of your employer. Avoid early withdrawals from retirement plans since tax penalties can occur. Use properly managed budgets to control financial necessities without tapping into retirement accounts.

Be Careful with Investments

If you want to get higher returns on investments, it?s important to know the inherited risks of certain ventures. Basically, check all interest rates for investment accounts based on your personal income and expenses. If you have money left after all expenses have been covered, check investment options available such as mutual funds, certificate of deposits, and retirement plans, amongst other.

Check Insurance Policies

Check and understand your car, health, and life insurance policies, which should have been provided previously by your school or parents. These policies will more than likely by your responsibility after graduating. As such, doing a thorough research on insurance premiums can greatly reduce the costs that you must undertake for insurance. Check the type of coverage you previously had, if any, to choose new affordable insurance premiums. Based on your income and overall finances, get insurance options based on your needs.

Graduating from college is an exciting event that starts with a new career and job opportunities. With this in mind you should consider the new finances based on future earnings with updated budgets and financial goals. Check available options for saving and insurance accounts while managing debt for a financially stable life after graduating from college.

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