Fresh from school, they know a thing or two.
You’ve recently graduated, and now life begins. What better way to start out in the world than with your finances under control? It’s easy to think there’s plenty of time to worry about money later, once you’re earning more and getting established. But the truth is, it’s never too early for good habits.
Here are four tips to help you start off on the right foot:
Be Realistic about Where You Stand
Before you can create a budget and live by it, you’ve got to know what you have and what you owe. USA Today College says recent grads need to get an idea of where they stand. This begins with totaling your income and debt.
Income may be easy enough to figure, but debt might require some investigation. If you haven’t received a student loan statement, call or email the lender and ask. Although student loan repayment is sometimes deferred for a while, it won’t stay that way forever. If you’ve got credit cards or other monthly payments, tally them up as well.
Add up your monthly income and subtract monthly debt payments to find out what you’ve got to work with. New living expenses come out of that.
Understand Living Expenses
Real world expenses are vastly different from those that dorm and college apartment dwellers are used to. Your next home after graduation might bring some surprises, even if you rented a house or apartment while in school.
Besides housing, you’ll pay utilities including electricity, water and perhaps gas, groceries, Internet, and you might want extras such as cable. You can ask utility companies for a history on the property. That includes average bills for the past year or more, which helps you know what to expect.
Ordinary monthly expenses can be a shock to someone who isn’t used to paying them. In many cases, you’ll have to adjust your expectations, at least for a while. You might not afford the apartment that you want right away without a roommate to share expenses.
Be wary of plastic.
Avoid All Unnecessary New Debt
New college grads might enjoy a period of financial freedom with little debt, but credit offers can be tempting. A new car, credit cards, furniture, or anything else that you can’t afford in cash seems within reach if someone is willing to extend credit to you.
Kerry Hannon writes for Forbes, “Debt is a dream killer.” If you owe too much, you might have to pass on a lower-paying job that you would love. If you’re already missing payments, debt could become a roadblock to any job where the employer checks credit.
Every new debt equals a new monthly payment. The amount that you had to work with at the beginning dwindles with every new expense that you take on. That seems obvious, but it’s easy to fall prey to the promise of things that you want in exchange for small payments.
Start a Budget Now
Budgets aren’t just for people who are established. In fact, there is no better time to start learning to live within your means than while you’re just getting started in the world. Budgets help you understand what you’ve got and where it goes, and they help you plan for the future. The sooner you start, the better your future will be.
Goals are important. With student loans, a major goal might be paying them off as soon as you can. Savings is also critical. In an unsteady job market, several months living expenses in the bank can be the difference between staying afloat, or getting into serious financial trouble. It’s also not too early to think about retirement. Save a small amount each month starting now, and you won’t have to invest large chunks every month later.
Mint.com has budget solutions that work for every stage of financial development. You can see your money at a glance from home or a mobile device, and get handy extras such as alerts when bills are due.
If you don’t think your income and current expenses merit the investment, you’re in luck; Mint software is free. Sign up for an account today.
Carole Oldroyd is a freelance writer who focuses on personal finance and staying out of debt.