Millions of students graduate from colleges and universities each year. Upon earning their degrees, many students shift their financial focus from paying tuition to repaying their student loans.
Student Loan Hero, a loan consolidation and management company, says Americans owe nearly $1.3 trillion in student loan debt. The average member of the class of 2016 can expect to have $37,172 in student loan debt upon graduation. That’s an increase of 6 percent from 2015. The Canadian Federation of Students says the average college graduate can expect to owe around $27,000 at graduation.
Student loan debt is not the only financial hurdle college graduates face upon graduation. Graduates need to learn how to make their money go far and start thinking about investing in the future - even though many graduates earn entry-level salaries upon graduating. The following tips can help grads manage their money and take control of their personal finances.
Save a portion of your paycheck. Newfound freedom may tempt grads to go on spending sprees or indulge in a few too many luxuries. Budgeting, which includes saving a portion of your paycheck for the proverbial rainy day, can set up a nest egg that will come in handy when unforseen expenses pop up. Grads who plan to move back in with their parents can save even more. Grads also can set up automatic contributions to savings accounts so they are not tempted to spend money lingering in their checking accounts.
Establish credit. Grads should begin establishing credit profiles as soon as possible. Open a low-interest credit card account and make payments on time, paying the balance in full whenever possible. A strong credit rating will be a significant financial asset in the years to come, influencing everything, including a person’s ability to make big-ticket purchases such as cars and homes.
Take advantage of employer-sponsored retirement plans. New grads may not be thinking about retirement, but the earlier adults begin saving for retirement, the more money they will have available to them when they do stop working. Take advantage of employer-sponsored retirement plans, such as 401 (k) accounts.
Protect against identity theft. Grads should keep careful track of their money and spending so they will know if they have been victimized by a security breach. Many people, and especially young people, live much of their lives online, making them highly susceptible to identity theft if they are not careful. Grads should always be aware of money coming in and going out of their accounts while also making sure to never share sensitive information online.
Pay off debt. Pay off high-interest debt first. Explore consolidation when repaying student loans and examine options regarding income-based repayment, which ties monthly payment amounts to income levels rather than total debt.
The future is just beginning for new graduates, and making smart financial choices is a large part of the years ahead.