Imagine taking the time to prepare yourself for a career, landing an awesome salary and then realizing you have no idea what to do with it (besides spend it ALL on endless amounts of things that totally work based on that rad infomercial you just saw). Money, whether you like it or not, makes the world go round – and it can also help ruin your life if you don’t know what you’re doing. I know far too many students that are aspiring professionals with bright futures, yet have no handle on their personal finances. It’s sad, but it happens. Don’t let it happen to you.
Here’s five simple ways you can start setting yourself up for financial success after college:
1. Know the difference between a need and a want.
This is probably one of the most basic lessons in financial responsibility, yet also the easiest for people to blatantly ignore. College needs might include books, parking permits, a meal plan, a laptop, campus housing or even a set of dress clothes you can use for career fairs, interviews and other networking events. In contrast, college wants might include getting drinks every weekend with your friends, splurging on a new dress for a sorority dance when you had plenty to choose from in your closet, getting pizza multiple nights in a row or coffee after every class, or perhaps getting that preppy planner that costs an arm and a leg that you’ll only be able to use for one year. There’s nothing wrong with treating yourself, but if you’re struggling to pay your rent, then I guarantee you will survive without those Hunter boots or Beyoncé tickets.
2. Create a budget and actually stick with it. It’s not the thought that counts with this one.
Knowing the difference between a need and a want goes hand in hand with creating a budget. There are tons of free resources and even phone apps available to help you create a budget, so there’s really no excuse not to have one. Banks generally offer online resources for their members as well, and you can usually set up an appointment to speak with an advisor if you’re really lost. If you’re graduating soon and hoping to perhaps get your first apartment, you’ll be in for a shock if you’ve never budgeted your money before. After utilities, car payments, phone bills, groceries, and whatever else you’ll be responsible for, you don’t want your bank account balance to be a total surprise. You should know ahead of time what you can afford, what to budget for, and how much money is left to spend on your wants.
3. Establish good credit.
Repeat after me: credit matters! Credit scores can help determine whether you’ll qualify for a car loan, an apartment, or heck, whether you’re still in the running for some jobs (seriously, I know someone who wasn’t offered a position in the financial industry because their score was below average – it can happen). For reference on how to get your credit established as a college kid, I’d recommend checking out what Dan Kadlec has to say in How College Kids Can Build Credit by Graduation or the advice Emily Gerson and Jeremy Simon offer on 10 Ways Students Can Build Good Credit. Don’t wait until your last semester to start thinking about credit – it follows you forever, and if it’s bad, it takes a while to build back up.
4. Understand your loans and how you’re going to pay them back (if you have them).
According to 10 Student Loan Facts College Grads Need to Know by Farran Powell of US News, the average 2016 graduate leaves college with $37,172 in student debt. As icing on the cake, a whopping 59% of millennial graduates say they don’t even know when their student loans will be paid off! Ideally you should have sat down and really researched the type of loans you’d be taking out before you ever signed off on them. However, if it’s too late for that, then start researching what you did decide to borrow. Some key areas to figure out are the amount of the loan you took out (duh), the interest rate, if a grace period exists and deadlines for payments. The Federal Student Aid official government website is a good place to start researching this material at and it also links to other resources if you need more information. It’s also a good idea to check with your financial office at school to see what type of loan counseling services they provide.
5. Find a financial advisor. It’s like asking your mom for help, but even better.
Spoiler: this was by far one of the best financial choices I made in college. I’m someone who asks a lot of questions, so having a professional to guide me financially is a huge weight off my shoulders. Whether you have questions about saving, budgeting, retirement, loans, investing, taxes, and so on, a financial advisor can keep you on track and help you make smart long term goals with your money. Personally, my financial advisor has helped me navigate the different benefit packages offered through an employer, how to set up a retirement savings and how much to contribute to it, how to budget for my long term goals, and how to strategically pay back my student loans while still having spending money.
If you decide to get a financial advisor (which you totally should, in my humble opinion) do your research and make appointments with a handful of them. It’s important to find an advisor that will really listen to you, is accessible by phone or email for quick questions, takes the time to get to know you, and who has a good reputation. If an advisor speaks down to you due to your age, doesn’t explain things clearly to you, or isn’t even certified – keep looking. If you’re confused on how how to choose a financial advisor, here’s a handy guide from The Wall Street Journal to help you make an informed decision.