CASH after college
Money-management tips for recent grads
Millions of students graduate from colleges and universities each year. Upon earning their degrees, many students shift their financial focus from paying tuition to repaying their student loans.
Student Loan Hero, a loan consolidation and management company, states that Americans owe nearly $1.3 trillion in student-loan debt. The average member of the class of 2016 can expect to have $37,172 in student-loan debt upon graduation. That’s an increase of 6 percent from 2015.
Student loan debt is not the only financial hurdle college graduates face upon graduation. Graduates need to learn how to make their money go far and start thinking about investing in the future — even though many graduates earn entry-level salaries upon graduating. The following tips can help grads manage their money and take control of their personal finances.
Save a portion of your paycheck
Newfound freedom may tempt grads to go on spending sprees or indulge in a few too many luxuries. Budgeting, which includes saving a portion of your paycheck for the proverbial rainy day, can set up a nest egg that will come in handy when unforeseen expenses pop up. Grads who plan to move back in with their parents can save even more. Grads can also set up automatic contributions to savings accounts so they are not tempted to spend money lingering in their checking accounts.
Henderson State University in Arkadelphia offers its students access to the CashCourse, which provides online personal finance tools to help students manage their money. In addition, students who receive federal student loans are required to have counseling at the beginning and end of their education journeys. Henderson State also provides access to educational tools from the Arkansas Student Loan Association. The university has coursework offered through the School of Business focused on personal financial management that is available for all majors. Every freshman also has to complete a course called Henderson Seminar. One of the units in that course is focused on money management, budgeting and credit cards.
“We want our students to understand what they’re taking on when they get a loan or credit during their college careers,” said Alexandra Tubbs, director of Financial Aid. “They’ll be more responsible as adults with money management if we help them learn now.”
Establish credit
Grads should begin establishing credit profiles as soon as possible. Open a low-interest credit card account, and make payments on time, paying the balance in full whenever possible.
Take advantage of employer-sponsored retirement plans
New grads may not be thinking about retirement, but the earlier adults begin saving for retirement, the more money they will have available to them when they do stop working. Take advantage of employer-sponsored retirement plans, such as 401(k) accounts.
Pay off debt
Pay off high-interest debt first. Explore consolidation when repaying student loans, and examine options regarding income-based repayment, which ties monthly payment amounts to income levels rather than total debt.
“Be a responsible borrower,” Tubbs said. “If you have taken out student loans to fund your education, know who handles those loans. Stay in contact with those companies. They can offer help if you get in a bind with payments, but only if you stay in touch with them.”
The future is just beginning for new graduates, and making smart financial choices is a large part of the years ahead.