Being a new graduate is exciting, as having unsupervised access to life can be great. However, as you exit school and enter the workforce, there are intimidating moments. What should be done with that first paycheck, and how do you maintain a responsible adult life? There are several mistakes that most new grads make after making that walk across the stage. Consider these tips to help manage your money.
Stay within budget
First, be realistic about your spending. Understand how much you have to spend and what you absolutely must spend money on. Don't blow your whole paycheck on extra things without first making sure that food and shelter are taken care of. That means groceries and rent will become staples of your budget.
A budget can change as soon as you leave school and begin your career. Figuring out your net worth is as simple as adding your monthly paychecks together and then subtracting credit card or student loan debts you pay each month. According to Mint, a good budget helps you understand what you have, where it should go, and helps you plan for the future.
Late payments negatively affect your credit score, which can make it harder to get an auto loan or mortgage for your first home down the road. Get a credit card through your bank instead of signing up for multiple retail cards that come with a one-time discount. Their interest rates typically spike after the first few months, and aside from the initial discount, there's no benefit to having them and it becomes that much easier to accrue a debilitating credit score.
Don't spend it all
A great tactic is to save monthly. Every little bit helps. Forbes contributor Kerry Hannon admitted that it's never too late to start. Putting aside as little as $10 a month can really add up. Hannon suggests enrolling in your company's retirement plan - most likely this will be through a 401(k) but checking with your bank about investing in a mutual fund is a wise strategy too.
A well-managed savings account can double as your emergency or backup fund. U.S. News & World Report considered $1,000 as the minimal starting amount for any savings fund to be used in case of an accident or sudden financial need.
Unforseen issues with your car that require immediate attention and sudden unemployment are common uses of a backup fund.
"A well-managed savings account can double as your emergency fund."
Save up enough to pay rent and utilities for at least three months, long enough for you to check the online job boards, interview for a new position, get hired and start receiving checks again. An emergency fund can be used to pay off medical bills after an accident as well. While healthcare has become more affordable for some, using a savings account to pay off a deductible is still a smart way to use your emergency money.
Bankrate suggested getting health insurance as soon as possible because medical bills are the number one cause for bankruptcy in the U.S.
Get renters insurance as well since it is notably cheap. The average renter has about $20,000 in a valuables and only needs to pay $20 to $30 monthly for full coverage. It'll be there in case any of your belongings are damaged or stolen. That way you don't have to spend all your money to get new items.
For more information about smart ways to manage your finances, contact Landmark Bank.
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