5 Money Tips for the Graduate
Graduation season is here, and whether you're graduating from high school or college, there has never been a better time to prepare for your financial future. To get the class of 2012 started on the right foot, here are five tips every graduate should consider.
1. Save now.
2. Create a spending plan.
3. Understand student loans.
4. Maintain a good credit history.
5. Share living expenses longer.College students and those just out of college often get the itch to find an apartment and live on their own. But once the utility bills start rolling in along with monthly rent, many find themselves stretched too thin. Instead, consider finding a roommate or two to help share monthly living expenses. If living at home is an option for you, it can also be a great way to save money. You don't want to overstay your welcome, but even living at home for a year after graduation can help you save enough money to buy a car, make a down payment on a house or build an emergency fund. Your credit history is important to obtaining future credit to buy a house, car or other major purchase. To maintain a positive credit history, be sure to pay all of your bills on time -- this includes your student loans, credit cards, utilities, cell phone and other bills. Curious about your credit history? Federal law allows you to obtain free copies of your credit reports every 12 months by visiting the official website at www.annualcreditreport.com or by calling (877) 322-8228. Review you credit reports carefully, and if you find errors or notice any suspicious activity, be sure to contact the credit reporting agency immediately. If you have student loans or plan to take them out, be aware that they come with a variety of features and repayment options. It's smart to understand the details of your loan agreements so you know when you have to start making payments, how much your interest rate and payment rates will be, what consolidation options exist and what to do if you get in a bind and can't make your payments. Creating your own spending plan -- commonly known as a budget -- is the best way to make sure you don't spend more than you earn. Track your expenses and compare the total to your income; then develop a realistic spending plan that works for you. Your spending plan will include fixed costs that are the same each month (rent, utilities, student loan payments and saving for retirement). The rest of your income is considered discretionary, and you control how that money is spent. After a few months of tracking your spending, you may discover that you need to cut back on things such as magazine subscriptions, fitness memberships, fast food, cable television, pizza delivery or dining out at restaurants. As you prepare to enter college or the workforce, saving is more important than ever. If you receive some extra cash as graduation gifts, stash it away in an interest-bearing savings account or CD at your local bank. Start by saving enough money to create an emergency fund for unexpected expenses such as major auto repairs. If you have a job, have a portion of your paycheck automatically deducted to a retirement plan or savings account so you won't be tempted to spend that amount. Many employers offer retirement savings plans -- and some will even match a portion of the dollars you contribute. This is free money you won't want to pass up!