For many new college graduates, stepping out into the real world can be a terrifying experience. For the first time in their lives, many new grads find themselves without the structure and support of parents and educators. Among the many new experiences and situations they will encounter, dealing with financial matters can be unfamiliar territory. There are many things new college graduates should know about money, before taking the plunge into adulthood.
Don’t Make Money Your Sole Career Decision
Many college graduates make the mistake of going with the first job they can find, or choosing the one offering the most money. While money is a major factor in planning your career, it shouldn’t be the primary deciding factor. Consider what you want to get out of your career, and where you hope to be in 5 years. Make sure that any long-term job you commit to is one that you will be satisfied with down the road. Is it better to take a high paying job that will leave you feeling burnt out in a short while, or a slightly lower paying job that you enjoy? These are important questions that will not only affect your present, but your future as well.
Create a Basic Financial Roadmap
There are countless expenses that you will be faced with when living on your own. Apartment rentals, security deposits, car payments, utilities, and living expenses are only a few. Before jumping in with both feet, it’s crucial to create a basic financial road map.
This will include all of the expenses you will be responsible for, and how they will factor into your current income. This will allow you to safely plan for your new financial responsibilities, and spot any major problems before they occur. Also, make sure to leave yourself some wiggle room and put some money into savings, for any unexpected expenses that will no doubt occur.
Understand the Difference between Gross Income and Take-Home Pay
This may seem obvious to many, but the difference between gross income and take-home pay is an important distinction to make. Gross income is the amount of your salary before tax withholdings and other deductions, such as health insurance. Your take-home pay is the amount of money that you will receive in your regular paycheck. When planning your finances, always use your take-home pay as a point of reference, as it will likely be less than your gross income.
Create a Due-Date Calendar
One of the biggest mistakes recent college graduates make with their finances is losing track of when their bills are due. When you’re working 40 hours a week, it can be easy to forget to pay the cable or electric bill. Most services offer automatic billing, but it is still a good idea to create a due-date calendar. Write down when each individual bill is due, and place the calendar somewhere you will interact with it on a daily basis, like near your keys or on the refrigerator. This will help you stay organized, and avoid surprise blackouts.
Invest in Renter’s Insurance
It may seem like an unnecessary expense, but investing in renter’s insurance can save you considerably in the long run. Renter’s insurance acts as a safeguard for your property, and is considered essential for all renters. Rental properties are susceptible to many forms of damage, including fire, theft, or natural disasters. Because of this, rental insurance is a worthwhile investment. Make sure to shop around, and find a policy that includes the 3 main coverages: personal property, liability, and additional living expenses.
While there are countless financial situations that may occur for college graduates, these 5 tips will help you get started on your journey into adulthood.