If college graduation is just around the corner, this article is for you.
Congrats, grad! Graduating from college is a huge milestone. One that launches you into a totally new phase of life.
Plenty of firsts are up ahead, including your first full-time job (with that first full-time paycheck) and maybe even your first time paying for your own apartment, cell phone, utilities, health insurance…(you get the idea). While heading out into the “real world” is an exciting next step, it’s normal for these new responsibilities to also trigger some anxiety.
We understand. We’ve been there too. We also learned firsthand that college prepares you for a lot of things, but often leaves out the lesson on financial literacy.
The good news is that you have plenty of time to learn that lesson on your own. And we promise, it’s worth investing the time to learn it! Financial literacy helps you skip over some of those financial mistakes people in their 20s are apt to make. But most importantly, it helps you feel confident managing your own money.
Here are some of our team’s tips for college grads.
Planning for Today
Make a Budget Plan That Works For You
If you land a full-time job after college, you’re probably earning more money than you have at any other time in your life. It’s important to keep track of it, know how much you’re spending, and know what you’re spending it on. Budgeting can help you do these things.
One budget plan we recommend is called the 50/30/20 budget. This budget allocates:
The 50/30/20 budget strikes a pretty good balance for most people. It makes sure that you’re not getting behind on your savings, or spending too much on those “want-to-have” things like Netflix, Uber Eats, or your Friday Starbucks run.
With a clear rule for essential expenses, you can more easily draw up a budget for monthly rent and grocery bills. To stick to 50% of your income, figure out your priorities. Maybe you live with a friend so you can splurge on organic groceries. Or maybe you keep your trusty college car to live in a one-bedroom apartment that’s all your own.
Budgeting should fit your lifestyle, and with the 50/30/20 budget, it can.
Tracking Your Budget
One great way to keep track of your budget is to use an app, like Mint or Pocketguard. These aggregate all of your accounts together to get a good picture of your spending and savings. The daily budget tracker will tell you what you have spent and how much you have left in your budget. Apps like these are a great way to take the guesswork out of your budget.
Pay Off Student Loans and Avoid Debt
If you have student loans, you probably want to get them out of your life as soon as possible. Luckily for you, it makes financial sense to do just that.
Find room in your budget to make aggressive payments toward your student debt. Try to pay more than the minimum payment each month. Paying only the minimum will allow interest to accumulate on your debt, costing you more in the long run. The quicker you can shed that debt, the better you’ll feel.
For some people, refinancing student loans can lead to sizeable interest savings. If you feel like your interest rates are keeping you from tackling your debt more quickly, consider refinancing. (Don’t know if that’s right for you? We can help. When you bank at TFNB, you gain access to our team of professionals. We encourage you to meet with a TFNB banker — our helpful, accessible bankers are the #1 benefit to banking local! We’ll help you crunch the numbers to see if refinancing could benefit you.)
Once you rid yourself of student debt, it would be silly to take on more, right? Here’s the easiest way: avoid buying things you can’t afford. Which brings us to our next point.
Use Your Credit Card Wisely
We recommend opening a credit card, so you can shop safely online and start building your credit. It may not seem important right now, but good credit will help you in the future with big purchases like cars and your first home.
The best advice for using a credit card is to treat it like real money. Don’t use it like a loan. At the end of the month, pay your balance in full. If you start getting in the habit of paying the minimum payment, it’s easy to rack up credit card debt in a hurry.
Credit cards are a great financial tool — as long as you spend with awareness, there’s nothing to fear about them. In fact, they can actually benefit you! Look for a credit card that will reward you with things like cash back or points toward travel like those available through TFNB.
Planning For Tomorrow
Start Saving For Retirement
“Retirement?! I haven’t even started my career yet!”
We know it may sound silly at first, but now is a time to invest in your future. Instead of thinking about savings as letting your money sit where you can’t touch it, think of savings as paying yourself. Throughout the month you pay the grocery store, your landlord, your student loan lender, and a whole list of other people, but savings—either for retirement or your emergency fund—is paying yourself so you have money when it counts.
By investing in your early 20s, you are maximizing the power of interest. To put it in perspective, here’s what your total savings would look like if you invested $250/month beginning at different ages:
See what a difference just 10 years can make? Don’t put off saving for retirement until you’re “older.” Start small if you need to; it’s the timeline that’s most important. (See it for yourself with this interest calculator.)
Talk to your employer about any retirement savings plans they offer. A 401(k) (or 403(b), offered through non-profits) is an employer-sponsored retirement account. It makes it easy to save for the future because it automatically pulls pre-tax funds from your paycheck (in whatever amount you choose) to go directly toward your retirement savings.
Your employer may match contributions to your account — 3% to 5% is the norm. If they do, don’t let it go to waste. We recommend investing at least as much as your company is willing to match. Otherwise, that’s free money you’re leaving on the table! If your employer advertises a 401(k) during the hiring process, don’t be afraid to speak up and get the information you need to set-up and fund it after you start your new job.
In addition to a 401(k), consider opening a Roth IRA. A Roth IRA is a retirement savings account that’s all your own — it’s not tied to an employer. The tax implications of both these accounts vary, so we recommend talking to a banker to make sure you understand your investments. If you’re looking for a Roth IRA in Waco, visit TFNB. We’ll be happy to walk through your options and find the right solution for you.
Planning With Us
Peace of Mind When You Plan with Your Bank for Life
Graduating from college can be equal parts thrilling and scary, but having a plan in place for your money can give you peace of mind.
We know it’s easy to rely on our banking app these days, but you shouldn’t be afraid to walk into one of our locations to meet with someone. Our bankers are here to answer questions. You don’t need millions of dollars to sit down for a conversation with a banker, you just need the courage to walk through the door.
If you are ready to open a new credit card, or that Roth IRA, or simply want to talk to someone about your personal financial situation, talk to a team member at TFNB. We’re here for you now, and for your future. That is why we’re Your Bank for Life.