8 money moves for new graduates
May 13, 2013
Assuming adult financial responsibilities may be one of the toughest tasks you face after college graduation. But if you approach the challenge in a logical and organized manner, it doesn't have to be as daunting as it sounds.
To help you get started, here are eight critical financial moves you should make soon after graduation.
1. Study the job market
You probably looked for your first post-graduate job either near where you went to school or near where you grew up. That's fine, but now that you are free to go anywhere to choose, you should make yourself aware of what opportunities are available elsewhere.
Location makes a big difference in the job market. According to the Bureau of Labor Statistics, state-wide unemployment recently ranged from a low of 3.3 percent to a high of 9.7 percent. Mean wages by state range from a low of $34,770 to a high of $54,740. Don't settle into your career until you are fully aware of all your options.
2. Update your checking account
Some banks have special terms that allow students free checking. Now that you no longer qualify for those terms, you should look for an account that will continue to give you free checking. Free checking accounts are in the minority, but they do exist, and they are more likely to be found at online banks than at traditional banks, according to recent MoneyRates.com research.
3. Open a savings account
For many students, banking is strictly a flow-through arrangement: Money goes into the account, but it soon goes out again to pay for tuition, expenses or fun stuff. Now that you're a graduate, you need to start accumulating money, and that means you should open a savings account.
Don't necessarily settle for the bank where you have your checking account. Savings account rates vary greatly from one bank to the next, and with the national average now down to 0.07 percent, it is very important to do better than average.
4. Check your student loan payment schedule
Most student loans have a grace period before you have to start making payments. This grace period is often six months after graduation, but not all student loans have a grace period and not all grace periods are the same. Check your student loan terms to see when you will have to start making payments, so you won't be caught short when the time comes. If you have multiple student loans, don't assume that the grace period is the same for all of them.
5. Upgrade your student credit cards
Some credit card companies have special offers that help students get a card with little or no credit history, but that usually means accepting a higher interest rate. If you've established the beginnings of a good credit history by consistently making your payments on time, and you now have a steady income, you may be eligible for a lower interest rate via a non-student credit card.
6. Build an emergency fund
One of the first rules of managing household finances is to expect the unexpected. You can prepare for the unexpected by building up an emergency fund. This can help you through problems like car trouble or losing your job. You might start slowly, but if you put a little of each paycheck into your emergency fund, it will build steadily while helping you develop one of the most important financial skills: the ability to save money.
7. Start saving for retirement
If your employer sponsors a retirement fund, start participating in it right away, even if you can only afford small contributions at first. Retirement may seem like a long time away, but the longer your money is in a retirement plan, the more it can earn though investment. That means that your earliest contributions have the potential to earn more of a return than the money you'll put into the plan in later years.
8. Create a household budget
Managing all of the above, plus taking care of the essentials such as food, clothing, and shelter, requires planning. To make this work you need a budget to determine where your money will go, and to make sure there is enough to meet all your needs. Just make sure your budget creates room for saving as well as spending.
Once you get past these transitional tasks, managing your household finances can become more routine. As a college graduate, you should be well prepared for the challenge. After all, a major purpose of college is to teach you how to learn, and when it comes to financial matters, you should never stop learning.