Congratulations to all the recent graduates! To honor those who have worked hard to accomplish this great achievement, we’re sharing 7 money tips to help you build a solid financial foundation for your life. If you’re not a recent grad, that’s ok, these tips can help you too!
7 Tips for College Grads to Manage Money successfully
Create your own bank accounts.
Create your Stability Fund
Crush your student loans.
Calibrate your credit.
Clear out toxic debts.
Consider your future home.
Choose your investing strategy.
1. Create your own bank accounts.
One of the first things you should do after graduating is make sure you have great checking and savings accounts.
You don’t want to keep your co-accounts which you probably opened with your parents, it’s time to get out on your own. You may want to rethink which bank you’ll want to have a long relationship with.
Bank accounts lay a foundation for your money management system, so they need to give you lots of benefits. Look for a bank or credit union that offers
No monthly fees
Interest earning checking and savings accounts
A great mobile app
Easy transfers options
Free bill pay, and
Working with a local credit union can be a great choice! If you have access to USAA (active and former military and eligible family members), there can be some major benefits to working with them, from insurance discounts to good savings rates, and great online service.
2. Create your Stability Fund
We recently did an episode about the “4 Financial Steps to Purposeful Living”. Starting a stability fund was number 2!
Save before you spend - We always recommend that you, “Save before you spend...so you experience stability today and in the future.”
1 Month of Living Expenses in Stability Fund (bare minimum)
1 month of living expenses will get you through most emergencies or expenses that are beyond your normal monthly budget expenses.
Continue $150 into savings (any increment of $50 based on income).
Should I be saving or paying off debt? Both … always need to grow the habit of saving.
3-6 Month Stability Fund
A smooth transition from one season to the next (job loss, medical emergency, maternity leave, other budgeted items in excess).
Think of the stability fund as an investment in yourself. It’s how you’ll stay calm and cool in the face of a potential crisis like losing your job.
3. Crush your student loans.
1. Make accelerated loan payments.
If you get paid every two weeks, a great strategy to knock out your student loans faster is to make accelerated or biweekly payments instead of monthly payments. There are 52 weeks in a year, not 48. So it’s a sneaky way to get the equivalent of one extra monthly payment made each year.
2. Pay more than the minimum.
The longer you take to pay off the loan the more it will cost you in interest. It’s best to pay as much as you can from the start. Start with paying at least more than the minimum payment.
Example: If you owe $50,000 at a 5 percent interest rate for 10 years.
Your minimum payment would be $53
You’ll pay $14,000 in interest over the life of the loan.
If you pay an additional $100 each month you’ll save about $3,000 in interest and pay off the loan two years earlier.
When you send more than the minimum payment or make biweekly payments, make sure that you add a note to your payment indicating that you want the extra to go toward your principal balance. Otherwise, the lender may think that you’re prepaying the next month’s payment and simply hold it or apply it toward a credit, which won’t help you get rid of the debt any faster.