college graduate financial checklist

College Grad Financial Checklist: For Your First Day Out In The Real World

So you just graduated college. Congratulations. Now what? 

The sad truth is, many college graduates aren’t prepared for the real world, especially when it comes to the handling of finances. Fortunately, there are a few tips that can get you on your way to a smart financial future.  

If you recently graduated and you are looking for ways to better handle your finances, read on to find out more. 

Check out Resources to Learn Out About Money Basics

It may be shocking to find out how many people have a poor understanding of their finances. Even after graduating college, former students may not know how to handle a credit card, how to set up savings and checkings accounts and how to set up a budget so they don’t go into debt. 

Fortunately, there are many resources that can improve financial literacy. and are just two web sites that offer financial literacy courses. 

There are also several books that can be helpful. These include Generation Earn: The Young Professionals Guide to Spending, Investing and Giving Back by U.S. News & World Senior editor Kimberly Palmer. Get a Financial Life: Personal Finance in Your 20’s and 30’s by noted personal finance commentator Beth Kobliner is another good choice. 

Even college grads that have been independent and in the work force for some time can benefit from these resources. 

Create a Budget

It is important for everyone to make a budget and creating one as soon as you get out of college is a great idea. 

When creating a budget, here are a few steps you will want to take.

  • Note Your Net Income: This is the amount you have coming in minus deductions
  • Track Your Spending: This includes necessities as well as entertainment and vacations. Account for variable expenses by finding averages.
  • Set Your Goals: Think of things you want to save for like retirement, a house and children. Make sure you are setting enough aside. 
  • Make a Plan and Adjust Where Necessary: Decide your priorities and cut back on expenses whenever possible.
  • Keep Checking In: Your budget will change as you get older. You may have new expenses, a new job and so on. Keep making adjustments to make sure your budget is working for you. 

You can create a budget on a spreadsheet, but there are also several apps you can use that have handy features. Some remind you to make payments and set money aside and alert you on overspending. Mint, PocketGuard and Clarity Money are a few that are recommended.

Deal with Debt

It is not unusual for students to graduate from college with thousands of dollars in debt, especially considering student loans. 

Debt should be paid off as quickly as possible. Although this is easier said than done, cutting down on other expenses will leave you with more money to reduce your debt and the interest expenses that come with it. 

Once you have paid off your debt, try not to let it rack up in the future. Don’t buy anything you can’t afford or pay for outright. 

Make an Emergency Fund

An emergency fund can be used in to cover your expenses in case of medical emergencies, deaths, natural disasters and the like. They can also be used to get you through if you find yourself unexpectedly out of work. 

Experts say that an emergency fund should contain enough money to cover 3 to 6 months of living expenses. 

Tuck a bit a way at a time until you reach this goal.

The best accounts for emergency funds are money market mutual funds or plain old savings accounts. Even though these don’t make much money, they are easy to access if you need the money immediately. 

Start Investing

If you are just out of college, now is a great time to get your money working for you. You have many years ahead of you which means you have plenty of time to see your money grow. 

When thinking of investments, stocks and mutual funds are great choices. 

It can be confusing to learn how to invest wisely but is a great resource for learning about stocks, bonds and mutual funds. You can also learn about investing by taking a community college course or by attending a webinar or live seminar.

Start Saving for Retirement

It may seem like retirement is very far away but experts say that it is best to start saving at a young age. Many employers offer their employees a 401(k) plan. If you enroll in the plan, a small amount will be deducted from your paycheck automatically. The money is tax deductible and it will grow, tax-deferred, until you are ready to take it out. 

If possible, invest enough so that your employee will provide the maximum match for your money. Most employees will require a 4-6% investment to qualify for the maximum match but this is a great way to grow your money.

At a young age, some might be leery of stashing their money away so it is out of reach, but they will be thankful that they made the decision later in life. 

That being said, there are penalties for early withdrawals with 401(k) accounts. Do your best to respect these by avoiding taking your money out early. 

Invest in Health Insurance

Health insurance is another expense young college graduates may think they are better off without. However, they will be glad to have it if they ever find themselves in emergency situations. 

In most cases, employees will offer health insurance. You also may be able to piggyback on your parents’ health insurance plans until you are 26. 

If not, shop around for an affordable insurance plan that works for you.

Splurge a Little

Even though money may be tight when you first get out of college, there is no reason why you can’t get out and enjoy life. Now is great time to get some terrific life experiences that you may not be able to have when you’re older and dealing with a job, a mortgage and kids. Be sure to set aside a bit of money for travel and entertainment so you can make the most of it. 

When you’re out of college, you may feel overwhelmed with planning your finances but once you get things under control, you will have created an easy to follow system that works for you. What will you be doing to make sure you are wise in the steps you take to build your economic future?