Financial Planning 5 Pieces of Financial Advice for New Graduates Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on Tumblr (Opens in new window)Click to share on Pinterest (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Zina Kumok Published Jun 8, 2021 - [Updated Jun 1, 2022] 5 min read Advertising Disclosure The views expressed on this blog are those of the bloggers, and not necessarily those of Intuit. Third-party blogger may have received compensation for their time and services. Click here to read full disclosure on third-party bloggers. This blog does not provide legal, financial, accounting or tax advice. The content on this blog is "as is" and carries no warranties. Intuit does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. After 20 days, comments are closed on posts. Intuit may, but has no obligation to, monitor comments. Comments that include profanity or abusive language will not be posted. Click here to read full Terms of Service. The first few years after graduating college can be a whirlwind. You might be starting a new job, adjusting to a new city, or trying to make new friends while staying in touch with old ones – or you might be doing all of that and more. By the time things settle down, it’s common to realize that your finances are heading in the wrong direction. That’s why it can be helpful to get your ducks in a row early on, so you can focus on building your new life without needing to stress about money management. Thankfully, you don’t need to figure it out all by yourself. We’ve got you covered with these helpful tips. Figure out your student loans ASAP Most private student loans and all federal loans provide a six-month grace period after graduation. Payments will not be due during this time, making it the ideal window to assess your student loan situation and figure out what your monthly payments will look like. If you have federal loans, log onto your federal student aid account and review your repayment options. The default option is the standard plan with a 10-year repayment term. This plan will have the highest monthly payments but the lowest total interest. You can also choose an income-driven repayment (IDR) plan, which will use your income and family size to determine your monthly payment. IDR plans often have lower payments but longer terms, either 20 or 25 years. Only choose an IDR plan if you can’t afford the standard payment, or if you’re working toward Public Service Loan Forgiveness (PSLF). The PSLF program requires that graduates work 10 years in an eligible nonprofit or government organization while making payments. After 120 payments, the remaining loan balance is forgiven with no tax consequences. If you’re a teacher, social worker, or military service member, the PSLF program may be a good fit. If you have private student loans with a high interest rate, consider refinancing at a lower rate. Compare quotes from several providers like SoFi, Commonbond, and LendKey to find the best rate. You may be denied if you don’t have a good credit score or haven’t lined up your first job yet. See your free credit score in the Mint app and check back in after finding employment to see if you’re a better candidate. Save an emergency fund immediately An emergency fund is the backbone of your finances. It keeps you from falling into credit card debt or withdrawing from your savings in the event of a financial crisis. Use your emergency fund for unexpected expenses, like losing your job, taking your dog to the emergency vet, or flying home for a funeral. An ideal emergency fund for a recent graduate should include three months of expenses. Add up your basic fixed expenses, including rent, transportation, health insurance, groceries, utilities, car insurance, and debt payments. Multiply that figure by three. Don’t worry if it takes you a while to save up enough. Keep your emergency fund in a savings account and only use it for real emergencies. Don’t tap into it to pay for Christmas presents or a bachelorette trip. If you do need to use your emergency fund, try to replace that money as soon as possible. You might have to cut back on non-essential spending for a few weeks to build the emergency fund back up. Start budgeting and tracking expenses A budget is a list of your expenses and how much you can afford to spend in each category. Budgeting helps you spend within your means, so you don’t overdraw your bank account or rack up a credit card balance. To start a budget, sign up for Mint and use their budget template, which has a variety of categories. Then, decide how much you normally spend in each category. You can figure that out by examining your credit card and bank transactions. Compare those expenses with your monthly income. If your expenses exceed your income, you’ll have to scale back. If you still have money left in your budget, consider allocating it toward saving or investing. Create sinking funds for your goals A sinking fund is a savings account that you use for a singular goal, like traveling home for the holidays, going on a trip with friends, or replacing your laptop. Having multiple sinking funds in place ensures that you have enough money for what you really care about. It also means you don’t pull money from your emergency fund. Create sinking funds for the following: Car repairs Travel and vacations Gifts, including weddings and Christmas Car insurance, if you pay for it semiannually Down payment for a house Set up separate savings accounts for each sinking fund to make it easier to see how much you have for each goal. Many online banks let you open multiple savings accounts and assign a nickname, like “Holiday travel” or “pet expenses.” Start investing now In your early 20s, the idea of retirement seems so far off. Why should you worry about retirement when you have decades to think about it? But investing rewards those who start young, even if they can only afford to invest $15 or $20 every month. The earlier you start, the less you’ll have to save over time. For example, let’s say you start saving $20 a month in an investment account that yields 8% every year for five years. After five years, you have $1,475.28. Then, you get a huge pay raise and start saving $200 a month in the same account. After 40 years of saving $200 a month, you have $741,897.56. If you had waited until you could afford to save $200 a month, you would only have $705,717.89 total. That’s a significant difference, considering the fact that you only contributed $1,200 out of your own pocket during the first five years. You can start investing easily with a robo advisor like Betterment or Wealthfront. Robo advisors examine your current income, savings, and retirement goals to determine how much you should save and what you should invest in. You can link your bank account to the robo advisor, which will automatically start investing on your behalf. Think of a robo advisor like a slow cooker – as long as you put in the ingredients, you’ll have a meal ready when you’re hungry. Previous Post 80 of the Most Flexible Jobs That Also Pay Well Next Post 17 Negotiation Tactics and Tips To Help You Score the… Written by Zina Kumok Zina Kumok is a freelance writer specializing in personal finance. A former reporter, she has covered murder trials, the Final Four and everything in between. She has been featured in Lifehacker, DailyWorth and Time. Read about how she paid off $28,000 worth of student loans in three years at Conscious Coins. More from Zina Kumok Visit the website of Zina Kumok. 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