Graduating from college can be a mixed bag of curiosity, excitement, and worries. Becoming a self-sufficient adult can even get more challenging if there’s a global recession when you graduate or get no job lined up. The worst part is that the expenses, bills, and loans won’t stop coming because you don’t have the fund to pay them off.
Looking on the bright side, graduating from college means you get to start your journey towards a true professional or entrepreneur and foster financial success. To make that happen, though, you need to first carry out a few financial moves that will help you thrive in the real world.
- Maximize earning potential
The first and most important step in setting up your financial journey is to plan out your potential earnings. Keep in mind that if you don’t have enough experience in the business world, it’s highly unlikely that you can start in upper management. That being said, you need to be realistic as to what job, position, and salary you can obtain.
But make sure not to settle as much that you’ll work your way from the lowest-paying staff up to the CEO. That only sounds great in theory. In the modern corporate world, many professionals earn around $10k more compared to coworkers in equivalent positions that began in much lower positions. Lastly, if you want to maximize your earning potential, you’d also need to develop specific skills, acquire real-world experience, and get certifications if your chosen industry requires it.
- Invest as early as you can
On average, a 19-year-old who invests at least $2,000 every year until they are 26 and never invest again can potentially have a balance of $1,000,000 when they reach 65. On the other hand, given that you get a 10% rate of return annum, you could earn $100,000 less of investment balance if you start at age 26 all the way up to 65. Now, think about how much you can get if you start in your early 20s and still invest the same amount until you are 65.
While you might be tired of hearing people saying saving and investing early hugely pays off, that is an absolute fact. Plus, this can help you build a responsible habit and approach to finances, aside from the fact that it obviously makes mathematical sense. The top instruments you can look into are individual stocks, bonds, exchange-traded funds (ETFs), real estate investment trusts (REITs), and certificates of deposits (CDs).
- Craft a plan for student loans
If your loans are federal, they could slip off your account only six months after your graduation. Still, it’s best to contact your loan provider regarding this, especially if you’re on a private or a mix of federal and private student loans. If you have a federal loan, you can look into the details on the website of Federal Student Aid.
You can also check if you qualify for an income-driven repayment plan, which is beneficial if your current or projected income is low. This caps at least 10% to 20% of your income, then spare the remaining balances after around 20 years. In case you have a steady job and good credit, you can try refinancing your student loans for a more convenient repayment and lower interest rates. Basically, you’ll acquire a single private loan with a shorter term to replace your multiple student loans, which is ideal if you want to pay off faster.
- Follow bare-bones budgeting
While there are tons of budgeting methods out there, let’s go with a bare-bones budget. Often referred to as the ‘survival’ approach, this budget only reflects your needs and none of your wants. This is an excellent way for you to acquire awareness regarding the income you need to survive and learn how to adapt your spending habits to your top priorities.
If you’re planning to open up a business the year you graduate, this method gives you a massive headway. Or, you want to save for a home mortgage down payment or prepare for future repayments. It’s recommended to look for the most reliable mortgage rates that suit your budget, in case you’re still on the lookout for one. Bare-bones budgeting includes houses, food, utilities, insurance and debt payments, gas, and family and personal care expenses. What it doesn’t include are clothing, vacations, entertainment, satellite TV or cable, hobby spending, and restaurant meals.
Regardless if you’re looking to be an independent entrepreneur and build your own business or work in your dream company, these smart financial tips can help you prepare for those goals. Don’t let yourself be financially ill-equipped in this highly competitive business and corporate world, and set yourself up for stability by following the tips here.