Despite their newfound expertise, college graduates often lack financial preparation for life after college. After receiving your first paycheck, it is essential to manage your money wisely from the get-go.
A better understanding of financial literacy will be valuable for recent grad students, from learning how to budget to how cost-effective it is to lease a car. These financial tips will set you on the right path to a healthy and prosperous future.
1. Create a Realistic Budget You Can Stick To
Setting up a budget is merely creating a plan for how you spend your money every month. It does not have to be perfect, only practical, with plenty of room for you to be spontaneous. A realistic budget can help you understand your monthly expenses, how much you can save and help you figure out if you are spending your money frivolously.
Create a list of your expenses, including your rent, utility bills, and monthly grocery costs. Use a spreadsheet to keep track of your spending, as these habits help you make better financial choices and lessen your penchant for wasteful spending.
2. Create a Savings Plan
Learning to save money without touching it will take some form of commitment. Most financial planning experts recommend paying yourself first.
You can accelerate your financial growth by opening an online savings account. Unlike current accounts, an online savings account is a little more challenging to access. Every time you receive your paycheck, save as little as 5% of your salary to your savings.
Ask your employer or your bank to create a debit order. Doing so will allow you to save without realising it.
3. Lease a Car
Leasing a car is incredibly beneficial to grad students trying to set up their financial futures. Car leasing is a far more cost-effective way to obtain a vehicle without acquiring additional debt through financing.
Taking advantage of leasing a car has several benefits, including driving the latest car models that are fuel efficient and economical. Driving a new vehicle without incurring debt is a smart financial move.
4. Track Your Food Costs
Food costs include your monthly grocery spending and eating out. It may sound like something you have under control, but eating out does not only include dinners with friends; it includes routinely grabbing your morning coffee or spending money on lunch instead of packing in one. When you learn to track how you spend your money on food, you can cut down on unnecessary costs.
5. Create an Emergency Fund
Much like creating a solid savings plan, prioritise setting a small portion of your salary for an emergency that you can access immediately. When faced with a sizable bill for an unexpected event, it could derail your finances.
It is crucial to determine the level of your emergency funds based on several factors, including your current living costs, the risk of unemployment, and whether you have other income streams. Ideally, you should be able to live off your emergency funds for at least three months.
6. Review Your Subscriptions
Streaming services are the new normal in this day and age. Many of us are guilty of subscribing to far too many streaming services, whether for movies, series, music or gaming.
Review your monthly subscriptions and add them all up. Decide which streaming services are worth keeping and which can be removed. You will be surprised how reducing the number of subscriptions can help you reach your financial goals.
7. Reduce Your Utility Bills
You can easily save money on your utility bills when you make small changes in your home. Installing energy-efficient lightbulbs, switching off lights in unoccupied rooms, and unplugging electrical appliances can help reduce your energy consumption.
8. Think Before Buying
Earning your first paycheck is one of the best things to happen to graduates. Overspending is easy when you have to make do with the bare minimum.
Ask yourself whether big-ticket buying items are necessary. Buying only what you need will prevent you from spending money that you could have added to your savings account or emergency fund.
It is perfectly okay to spoil yourself occasionally; however, spending money on unnecessary items can bring you into debt.
The Bottom Line
Transitioning from student to working life can be challenging, and setting yourself up for future financial health is not without these helpful tips. You can set yourself up for financial freedom by having a plan and learning as much as you can now.