You have just graduated from college, and you are about to join the working class. You will now start earning a regular income probably for the first time in your life. Now that you have the means to achieve financial stability, it is now your responsibility to ensure that your money is spent wisely and that you save something for the future.
It is not uncommon for fresh graduates and new hires to be overwhelmed. For many of you, it is the first time you will be earning some serious money. It is also the first time that you will truly be independent from your mom and dad, who will no longer be available to ride to your rescue and give you a weekly allowance.
Bad Habits
For many, the first few years of working are fraught with spending, spending, and more spending. For the first time you can buy what you want and nobody can stop you because it is your money after all. It’s okay if you spend for your future, but more often than not, your money is spent frivolously on designer clothes, the latest gadgets – that kick-ass LED television in your living room – and other non-essential things. Pretty soon, things like paying off student loans are not a priority, and you rack up charge after charge in your credit card. These bad habits can lead to dire consequences.
This is the situation many young Americans are currently facing. They end up spending way beyond their means and become burdened by massive amounts of debt. With today’s economy, job security is a thing of the past. Not only are many graduates unable to find work, many have lost their job or are stuck working at jobs for which they are overqualified. You end up seeing people in their 20s and 30s filing for bankruptcy, and even if they don’t have to go to that extreme, many of them are living at home with their parents.
Do you want that to happen to you?
Of course not! Thus, it is very important to educate yourself about proper money management. Start as early as possible so you can meet your financial goals as soon as possible.
Have Financial Goals In Mind
What are your dreams and aspirations? Most of you have some kind of bucket list. Whether it’s owning your own home, having your child graduate from an Ivy League university, or taking a trip around the world, you should know that everything has a price tag. To be able to realize your dreams, you should set financial goals that match. You need to identify your objectives and rank them in accordance to your priority. Financial goals change all the time, and circumstances may prevent you from reaching them. Thus, you should revisit them once in a while to check where you are and to see whether they are still achievable.
Budget. Budget! Budget!!
Any financial expert will tell you that this is the most basic and most important part of money management. By budgeting your monthly salary, you will be able to allocate it properly. You need to keep track of your expenses and compare them with your budgeted amount. You can see whether you are spending on necessities or are just buying frivolous things that do not truly benefit you. If it is more than your estimate, you either have to scale it down or look for ways to increase your income so that you can meet your spending habits.
Automate Your Savings
One basic rule is to have a savings account that is separate from your payroll account or the account where you receive your money. That way you don’t see the money grow on your payroll account, giving the illusion that you are building wealth and earning a lot. A combined account will only make you spend more.
Ah! The wonders of modern technology and internet banking are so great. You can now choose to automate your savings account. That means that after every payday, a set amount of money is transferred to a separate account that acts as your savings. You don’t get to hold it so you don’t have that impulse to spend your entire salary. An ideal amount would be 10-15% of your salary for that payday. Others even recommend as much as 30%. You might even want to choose a savings account that gives higher interest when the money remains untouched. It’s an extra incentive not to use the money!
Let Us Know!
What are you doing to save money? Do you have a budget or savings goals? Let us know!
{ 3 comments… read them below or add one }
This is a great post! I didn’t get really savvy with money until grad school, which is when I took over all of my bills. Then and only then did I realize how important it was to budget. Now, I love doing it so much!
This is why I think people should definitely take over their bills before college/grad school. However, I’m glad you were able to recover and get it down.
These are not only critical rules for new graduates to follow but all of us should make them a necessary part of our financial life. If these rules are followed consistently financial success and security becomes a real possibility if not a probability.