While graduating from college is an exciting time it can also feel a bit scary. After all, you’re leaving the student life and heading into official adulthood – a land full of working, paying bills and other responsibilities. (Don’t worry it’s not all bad – there’s plenty of fun to be had too.)
Building your financial life after college graduation is extremely important. You’re now setting the stage for your future years. Here are some financial decisions you’ll need to make.
What Your New Budget Will Look Like
If your new degree has already landed you a job you should have a feel for what your take-home pay is going to be. Use this pay to create a zero-based budget.
A zero based budget is a budget in which you essentially spend your money before you get it. For instance, if you know that after taxes you’ll be bringing home $2,800 per month you’ll go ahead and assign a dollar amount to all your budget categories before you get paid.
Here’s an example:
- Rent $950
- Utilities $250
- Cell Phone $75
- Transportation $100
- Student Loans $400
- Credit Cards $225
- Food $300
- Entertainment $100
- IRA $150
- Savings Account $250
Total = $2,800
If you don’t make a plan for your money now you’ll have a hard time meeting your financial goals in the future. Go ahead and create yourself a zero-based budget.
Where You’re Going to Live
If you’ve been living in the dorms or share a house with a bunch of college students it’s time to determine where you’re going to live going forward.
You can rent a house, move in with your parents, find roommates to split a rental with, or even start saving for a down payment for your own house. The most important thing is that you take your income and budget into consideration.
Ideally your housing costs (rent/mortgage, insurance and utilities combined) should be less than 50% of your take home pay. If you want to speed up savings or debt repayment then you need to find inexpensive housing.
This is one area that can make or break you. If you spend too much on housing costs you won’t be able to pay any of your other bills and accelerated debt pay off will not be in your future.
How You’ll Be Paying Back Student Loans
When it comes to paying back student loans you may find that you have several repayment options. The basic student loan repayment options include Standard, Graduated and Extended. Beyond this you can also apply for income based repayment plans for your federal loans, among other options.
No matter what payment plan you choose or are currently locked into, you need to get to know your student loans.
If you don’t want to be paying your loans back for the next 10-25 years you can make a plan of attack for paying them back at a faster speed. Here are some stories of how others paid back their loans quickly.
Stepping out of college life and into official adulthood can seem scary. However, with the proper planning you can set yourself up for a wonderful financial future.
Start with the basics – make a budget, keep your expenses low and make a plan of attack for your debt. Getting these few things under control will set you on the right path.