The first summer after graduating from college can be an exciting time for young adults. Many life changes may occur during this period, such as getting a job, renting an apartment and purchasing a new car. However, all of these changes have financial ramifications, and it’s pivotal that new graduates who have never managed their own money proceed with caution to avoid missteps.
“Graduating and shortly after is one of those make-or-break transitions that can have a big impact on years to come,” personal finance author Kimberly Palmer told FoxBusiness. “Some people get into trouble then by racking up credit card debt, which they’re stuck paying off even into their 30s. Planning a realistic budget and sticking with it can help avoid a lot of trouble.”
One of the first steps young adults should take is assessing where they stand financially and where they will be when their student loan grace period ends. Those with federal loans have a six-month grace period before they must begin repaying their debt. During this period, it’s important to review different student loan repayment plans. In addition, young adults will benefit by taking care of any balances they currently carry, such as credit card debt, the news source reports. When their grace period ends, individuals may be weighed down initially by their monthly payments. Ridding themselves of other types of debt can be a good way to keep their finances more manageable.
Many young adults graduate without a job, and if this is the case, individuals should use money in savings, checking or from graduation wisely. This may involve starting an emergency fund to cover sudden expenses, investing in a certificate of deposit or other investments or setting money aside for a security deposit on an apartment. Regardless of how young adults decide to use their financial resources, it’s important to house funds in a high-interest savings account to start taking advantage of interest and get used to managing cash wisely.
Lastly, creating a money management plan is imperative. If you have never created a budget in the past can avoid mistakes by seeking assistance from parents or enrolling in credit counseling. The latter can also introduce individuals to resources that can make money management easier, such as loan calculators, budgeting spreadsheets, savings tips and debt management techniques.