Hats off, graduate! You have studied a lot, passed the exams and now have a degree.
Now that you have graduated, you are likely to enter the workforce or begin postgraduate studies. Or maybe take another route. But whatever you do, you need to learn how to prepare for financial success. But how?
A good first step is to talk to someone you trust to give you money advice. Unfortunately, because the subject tends to bore us, we tend to avoid it. But the reality is, the sooner you educate yourself, the sooner you are on your way to financial success. Well, where to begin? Since many graduates have student loan debt, it's a good idea to start planning how you're going to pay it off.
Make a spending plan.
From day one, you have to budget. You have to establish what you are going to invest your money into.
There is no perfect way to set up a spending plan, but many experts recommend that you start by dividing your monthly income into groups. Start with the basics, such as the cost of living, working, and food. These areas will be your biggest expense, and efforts to reduce them will be the most important. If you drive 80 km a day to get to work, for example, it can be cheaper to move closer to your place of work.
Save an emergency fund.
You must allocate part of your income to create an emergency fund. Most financial advisers recommend keeping your living expenses for 3-6 months in a savings account, but some say you should aim for something more. In this economic condition, it is advisable to aim for 6 to 12 months. We hope Covid doesn't come back, but we have to be ready. If there is another outbreak, there is no guarantee that the government will provide financial support.
Student loans
It's important to plan how to pay off any loan, and student loans are no different. The faster you pay, the less interest you will pay over time. One way to reduce the principal and the loan repayment term is to pay more each month. Paying more on your own capital now means paying less in general. And if you have more than one loan, consider paying off loans with a higher interest rate first to reduce the total interest you will pay.
Budgeting
A budget is a great way to keep track of the money you earn and the money you spend. Making a plan on how to save and spend money based on your monthly income and expenses can help you earn a living. Set spending goals like rent, food, recreation, clothing, and transportation, and then try to hit them. Don't worry if you don't do it right the first time; You may need to make changes as you find what's best for you, and because saving and investing is essential to your financial well-being, your budget should include both.
Save for retirement and more.
While retirement may seem light years away now, it's never too early to start planning.
Make sure you participate in the employer's pension plan, if available. If you don't have a 401(k) advantage, you still have options like a traditional or Roth IRA. Save or work to save, 12-15% of gross annual income (before taxes) including employer contributions (which means it will be a certain percentage of the money you invest - it's like free money!). It's also important to save for emergencies, like an unscheduled car repair or a medical bill. You want to keep your emergency fund in an easily accessible account, such as a taxable or Roth IRA account.
Build good credit
If you want great deals on interesting items later in life, like car payments and mortgages, it's worth building a solid payment history for people right now when you borrow money. Learning the habits that will give you a high credit score will help you get better rates when you apply for loans in the future.
If you don't already have one, an annual credit card is a place to start. Once you've set your budget, start funneling a few bills onto your credit card with a huge red flag to pull it off in full. Send payments just to show creditors that you pay them every month. But make sure you start small to reduce your chances of going bankrupt and getting into debt.
Once you've learned how to pay off your first card, it may be a good idea to diversify your credit by opening another card. But keep the oldest card open. The credit bureaus analyze the entire credit history, which gets shorter when you close the first card.
You can track your credit score by signing up to a free monitoring site, but be careful so that scammers don't get your details. Some card issuers, such as Citi and Capital One, also offer monthly credit score updates.
Final Word
Congratulations on taking the next step in your preparation for success. Establishing healthy financial habits can be difficult at first, but it pays off in the long run. Your future will thank you!
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