Graduating from college may feel like crossing a finish line. After all, you’ve put in years of hard work to get to this point.
In reality, you’ve only crossed the starting line of your career and financial life. How you run the race matters – just as it mattered in college – and will have everything to do with how well you finish (retire).
Here are seven things you can start doing right away to ensure you reach the finish line in the best shape possible.
1. Prioritize your student loan payments. Like now. No, now.
Yes, you usually have a grace period of six months after graduation before you must start repaying your loans. That doesn’t mean you should put off preparing for that day. Contact your student loan servicer to ensure you have all the correct information you need to start making payments. Don’t know who your servicer is? Contact your financial aid office. They can also help answer any questions you may have about repayments.
Most importantly, you want to ensure you don’t start out making late payments. Not only will doing so mess with your credit score, you’ll also incur late fees, adding to your already sizable debt. And if you don’t make your payments at all, you can expect the government to eventually garnish your wages. Avoid the mess by getting your payments in order now. Choose a repayment plan that works for your finances and financial goals, and look at student loan forgiveness options for which you may qualify.
2. Create a budget.
Maybe you already did this in college. If not, it’s a good idea to read up on some of the easiest ways to create a monthly budget. As boring as it sounds, your budget is your road map. Just like you wouldn’t take a road trip without knowing how to get to your destination, it’s also unwise to try to navigate your finances without tracking your progress toward your financial destination.
Once you’ve established a budget, it’s important to stick to it. Sure, you’ll have slip-ups from time to time, but if you stick to your budget and have allotted enough money for an emergency fund, unexpected expenses shouldn’t send you into a fiscal frenzy.
3. Be practical.
Sure, you want a fancy car, and sure, you can probably swing the monthly payments for it, but cars are awful investments. They lose value while also costing money to operate. Instead of getting a fancy car, consider a practical, used vehicle with low miles that you’ll be able to pay off quickly, freeing up money for savings and investments that will grow over time.
4. Remember compounding...
Speaking of savings and investments, remember: Compound interest is your friend when it comes to saving for the future. The more money you can put into your 401(k) early in your career, the better. That’s not to say you should run up a bunch of credit card debt while you’re sinking too much of your income into investing. It’s all about balance, but the sooner you can start, the more money you’re likely to have at retirement.
5. ...but don’t forget emergencies.
Before you start investing money for the future, it’s important to have some cash on hand for an inevitable rainy day. Shoot for having at least $1,000 in savings as soon as you can, then try to grow that to $10,000 over the next couple of years. Ultimately, you’ll want at least three months salary in savings so you have a cushion should you ever lose your job or need to leave.
6. Establish your own credit.
If you don’t already have a credit card, either in your own name or as a co-signer on one of your parents’ accounts, now’s the time to apply. It’s a good idea to start with a basic card that has a low interest rate so that if you have to carry a balance, it won’t put you in financial trouble.
You may want to avoid getting a credit card because of the temptation to run up debt. The financial reality is that a strong credit score is important if you want to be able to do things later in life like qualify for a car loan or mortgage at a decent rate. Credit affects things you wouldn’t necessarily think are related, like insurance rates. The better your credit, the lower your premiums can be for things like car insurance, homeowners insurance and renters insurance. Establish credit early in life, make your payments on time and don’t run up too much debt (and make your student loan payments), and you’ll end up with solid credit in just a handful of years.
7. Get insured.
Speaking of insurance, it’s also a good idea to have health insurance. If your employer doesn’t provide it, look at the costs of securing it for yourself. Also consider long-term disability insurance if you can swing it. Your health is one of your greatest assets, and insuring against accidents and illness can be one of your most important financial moves at every age.