If you are close to graduating or have recently done so — congratulations! This is a huge achievement and will mark a massive transitional period in your life.
What comes next? As you leave college and enter the world of postgraduate employment, you are also entering a brand new phase in personal finance.
How you treat your finances now will have lasting implications for years to come. To help guide you, we've put together some simple financial tips for new grads.
6 ways to start budgeting as a new college grad
1. Keep your rental costs as low as possible
One of the biggest expenses to account for is monthly rent or mortgage payments. That's why so many new college grads move back home with their parents to save money.
If that's an option for you, it's worth considering. Making a move like this could allow you to save for a down payment on a house or to pay off a chunk of your student loans.
Even if you can't live there rent-free, splitting your living costs with family members is usually more affordable than getting a place on your own.
However, this method only really works if you can commit to reducing your spending, saving money, and paying off debts. Don't be tempted to spend your savings on a new car or iPhone!
If moving home isn't a possibility and you have to rent, try to avoid renting a place that exceeds 30% of your monthly income. Some ideas to consider include sharing rent with one or two roommates or moving further away from a town or city center to take advantage of potential lower rental prices.
2. Determine cash flow
One of the most important steps in creating a budget is to determine your cash flow. This means looking at the money you have coming in and going out each month.
Once you have a clear idea of your expected monthly income and all of your recurring monthly expenses, you can create a budget that works well for you. Try out methods such as the 50/30/20 rule to keep your spending under control and save money while you do it.
3. Prioritize student loan payments
One of the most important things new graduates need to keep in mind is student loan repayments. If you're lucky enough to live rent-free (or cheaply) with your parents, take this opportunity to pay off as much of your student loans as possible.
If you are struggling to meet student loan payments, a different payment plan might be in order. To learn more about what choices you have, contact your loan servicing provider.
4. Keep your grocery budget under control
Groceries can be one of your biggest expenses after things like rent and bills. It's easy to overspend and give in to impulse purchases.
Some tips to keep your spending under control include shopping with a strict budget, shopping with a finite amount of cash, writing a shopping list before heading to the store, and meal planning for the week.
5. Keep entertainment costs manageable
Don't worry. We're not saying cancel your Netflix or Spotify accounts. But try to pick just one or two subscriptions to keep entertainment costs manageable.
If you spend a lot on entertainment or going out, look into free or less expensive entertainment options. This could include using the library, attending community events, or hosting a game night with friends. If your friends are also new grads, they will likely be in the same boat as you, so you can try these new things together.
Start saving for your future
Saving money, sticking to a strict budget, and paying off student loans aren't the most exciting things to spend your postgraduate income on. However, now is a critical time to establish good money habits to set yourself up for future stability. Don't neglect your debts and try to keep your expenses down.