This post is dedicated to the Class of 2021. We salute you for your hard work, your dedication to earning your degree, and your ability to be resilient during this unprecedented time. Life looks a little bit different for you now as you forge your way into the next chapter of your lives, but we have no doubt you’ll be a force for good in this world, whatever you choose to do.
As you begin to sift through those yearbooks and reflect on memories past, we hope you’ll take a moment to think about all that is ahead and all that you can accomplish in your next adventure. To ensure you’re feeling as prepared as possible, we’ve compiled some of our greatest tips and tricks to help you as you carve your new path. We hope these help guide you along as you get started fueling your tanks for a new mission and we sincerely hope you’ll pay it forward to future grads by passing along what you learn along the way.
Cheers to you! We always knew you could do it!
Tip #1: Save, save, save.
As you start earning those first few paychecks, it can be so tempting to splurge on fun purchases and test the limits of your credit cards. However, instead of going hog-wild at Home Goods or refreshing your entire summer wardrobe, aim to try to save at least 15-20% of your paycheck. We know that sounds like a lot but trust us – those savings will serve you well in the long run. Open a dedicated high-yield (aka: a safe and secure savings account at a bank or financial institution that offers no fees and a high rate of interest) savings account just for your emergency savings. Aim to have an emergency stash of at least 3-6 months of your monthly income and start building those reserves with your very first paycheck.
Not sure where to go to open your account? Check out this list for the best interest rate offers currently available near you.
Tip #2: Don’t sleep on those student loans
Financial ignorance is NOT bliss, and when it comes to those student loans, it is way better to face the facts and know what you owe than to blindly make a payment each month and hope for the best. Take some time to review the terms of your loan, your payment obligations, and make a plan to consistently pay these down each and every month. Keep in mind, the Standard Repayment Plan (where payments are spread out over a ten year period) is the default payment option in most cases. However, if this plan does not work for you, make sure you contact your loan provider to discuss other repayment options. There are a variety of options that may work for you depending on your financial situation and income restrictions.
Furthermore, don’t forget that Federal loans offer new graduates a grace period of six months between graduation and the date of their first payment. Don’t miss out on this opportunity to make payments anyway to reduce your interest expenses, particularly if your loan is unsubsidized.
Finally, to close on the student loan subject, make sure you resist the temptation to live lavishly and extravagantly in those earlier years. If you have the ability to make additional payments to your student loans each month (beyond making the minimum payment required), you’ll be saving yourself in interest over the long run. Your future self will thank you!
Tip #3: Start budgeting NOW!
Budgeting is so important, and if you can begin to adopt the behavior of tracking your income, expenses, and savings now, you’ll be so much better off in the years to come. Take some time to set up a monthly budget system where you track your monthly income, categorize your expenses, and set some savings goals in place. Being mindful of your spending is such a great way to control where your money is going each month instead of it controlling you! If you need help budgeting, be sure to check out our Budgeting Workbook here!
Tip #4: Start contributing to your retirement as soon as possible
As soon as you have earned income, you can begin to contribute to your employer-sponsored retirement plan (aka: 401k, 403b, Roth 401k, etc.) or open an Individual Retirement Account (aka: an IRA) on your own. The retired life may seem so entirely far away but those days WILL come and starting to contribute to your retirement accounts early can make all the difference.
If your employer does offer you a retirement plan option (which would be in the form of a 401k, 403b, Roth 401k, or pension), it is a good idea to participate. Make sure you opt-in to the plan and select a specific percentage of your paycheck that you’d like to contribute. If your employer offers an employee match, make sure you contribute at least enough of your paycheck in order to get their match on top of your contribution. For example, if your employer were to match up to 3% of your salary, then be sure you at least contribute 3% of your salary to get the full benefit of their contributions. Their contribution is essentially free money ready for the taking. Don’t sleep on this huge benefit! For more on how to get started with your 401k, visit this post here!
Tip #5: Try to find affordable housing
We realize this may not be entirely feasible depending on the market you live in, but if you can, aim to keep your monthly mortgage or rent payment to 30% of your income (or less). For instance, if your monthly income (post-tax) is $3,000/month, aim to spend no more than $1,000 on rental or housing expenses. This way, you’ll still be able to prioritize and afford the other areas of your life without spending all of your money on housing.
Tip #6: Build credit responsibly
Now is a perfect time to begin building and establishing good credit history. What you do in these early years can greatly help you achieve an excellent credit score when it matters in the future. When you go to buy your first home or make your first major purchase, you’ll be so glad you took the time to build good credit earlier on. For more on building good credit and what goes into a credit score, visit our post here!
Tip #7: Invest early and often
If you have additional money in your budget to save and invest, consider opening a Roth IRA if you meet the income restrictions (spoiler alert: many new graduates do). You can contribute up to $6,000/year in this type of plan and this is a fantastic way to prioritize your retirement from the get go. Thanks to the magic of compound interest, starting to invest early can be one of the most important things you can do to set yourself up for long-term financial success. Don’t wait to get started until all of your student loans are paid off if you can help it. If you wait until you’re finally debt free, you might find that you’ve wasted multiple years of earning potential in the process. Even a little bit goes a long way if you start early enough.
Tip #8: Learn to cook at home
You’d be amazed how much money you could save if you learn to make a few tried and true meals each week for yourself at home. With the many amazing instructional recipe videos and food blogs out there on the internet, even a total kitchen novice can learn to whip up some delicious classics. If you’re not sure where to start or how to find budget-friendly recipes, check out some videos here or visit these popular food blogs for inspiration:
Tip #9: Protect yourself with renter’s insurance
Believe us when we say that you can’t afford NOT to have renter’s insurance. Even if your landlord does not require you to have this type of insurance, it is such a smart thing to get anyway. Most renter’s insurance plans are fairly inexpensive (<$20/month) and can save you TREMENDOUSLY if anything were to happen to you or your property. Trust us – take 20 minutes to get a quote today to ensure you’re protected.
Tip #10: Don’t play the comparison game
The sooner that you learn that the Keeping Up With the Joneses game is a trap, the better off you’ll be. Resist the urge to compare your life to anyone else’s and be mindful that everyone, no matter who they are, has their own set of challenges and struggles. Social media, as much as we love it, can be dangerously unhealthy in making you believe that everyone seems to “have it all” but you. Avoid falling prey to the highlight reel on your Instagram or Twitter feeds and instead, focus on the things within your control. Don’t go broke trying to act fake rich to impress others. Get ahead by being yourself, living within your means, and staying true to your goals.
What advice would you give to other grads? What would you go back and tell your 20-something self if you could? Tell us below!
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