Money Management Tips for New College Grads

As a new college graduate, you may feel excited and overwhelmed as you enter the next phase of your life. One of the most important things to do during this transition is to get your finances in order. Here are a few money management tips to help you get started.

Manage your expenses.

Money management is crucial when you are just starting in the working world. If you don’t, you may struggle financially in the months and years ahead. The best way to start managing your expenses is to track all of your transactions. Small purchases add up, and it’s easy to forget when you’re not looking at your purchase history entirely. There are plenty of online expense tracking apps out there that make it simple to keep tabs on your financial decisions. When you do this, you’ll also figure out where you can spend extra money effectively. Investing your extra money in stocks can have a significant long-term impact. Platforms like FinanceCharts offer a simple way to search stocks for free. There are risks involved with investing your money, so keep that in mind when you’re prioritizing certain financial decisions over others.

You’ll also want to pay off long-standing debts on time or contact your loan provider for assistance. Student loans, credit card bills, and other debts can quickly spiral out of control if left unpaid. Figure out how much extra money you can put towards your debts each month and make a plan to pay them off as soon as possible.

Create a realistic budget.

Once you’ve started tracking your expenses, it’s time to create a realistic budget. You can either choose a monthly or daily budget. As long as you follow it, you should start seeing your savings grow pretty quickly. To start, analyze your daily or monthly expenses and prioritize them. Your rent or mortgage should be at the top of the list, followed by bills and other necessary costs. Try to leave room in your budget for some fun activities, too; otherwise, you’ll feel burnt out by your financial journey. If you accidentally go over your budget, try to understand what happened and see if you can adjust your priorities effectively.

Have an emergency fund.

One of the most important things new college graduates can do to set themselves up for financial success is to have an emergency fund. This means saving up enough money to cover at least three to six months’ worth of living expenses in case you experience an unexpected loss of income. You’ll also have peace of mind knowing that you have a cushion in tough times, like losing your job or being involved in an accident. More notably, it can help you avoid going into debt if something unexpected happens, which can be detrimental to your credit score. It also allows you to stay afloat financially while you search for a new job or get back on your feet after a major life setback.

So how much should you save up for your emergency fund? That depends on your situation. But as a general rule, aim to save 20 percent of your take-home pay each month until you’ve accumulated enough money to cover three to six months’ worth of living expenses. If that seems too big of a challenge, start smaller and work your way up over time.

Live below your means.

Living below your means is a money management strategy that involves spending less than you earn. This can help you save money, build wealth, and achieve financial stability. However, this doesn’t mean you have to struggle. Consider making cost-effective transportation and housing decisions first. For example, you may want to purchase a bus pass instead of a new car—especially if you live in a city. A studio apartment is an excellent start for a single college graduate compared to a lofty two-bedroom. If you don’t want to sacrifice certain life amenities, look for ways to mitigate your costs elsewhere.

Financial management is an opportunity for anyone to prepare for their future, regardless of age and lifestyle. By following these tips, your money management strategies will give you more financial freedom.