Learn and Plan | Financial tips for recent college grads
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Financial tips for recent college grads

Jun 9, 2023, 7:53:26 PM | Reading Time: 5 minutes

Graduating from college is an incredible accomplishment as you head toward an exciting future. After the ceremony has wrapped and you’re ready to enter your post-grad life, you may have some reservations about the road ahead. You can take several steps to help ease the transition from student to full-time employee, get the ball rolling financially, and create a solid foundation to build your life upon.

Paying off a student loan

Around 9.9 million borrowers1 in this country have between $20,000 and $40,000 of student loan debt. If you’re one of them, you are likely trying to determine the best plan of action to pay down your balance. By planning, you can help minimize the financial burden of student loans and create a personalized strategy that will allow you to get on top of debt. Sometimes, you may be eligible for student loan forgiveness, where your loan is forgiven, canceled, or discharged. For example, if you become a government employee or a full-time teacher, you may be able to receive loan forgiveness.

How do I create a student loan repayment plan?

Most student loans allow a six-month grace period after graduation before your first payment is due. If you can begin payments during that period, consider doing so, even if it’s a small amount. Your interest adds up over time, so the sooner you can pay down your balance, the more you can save in the long term. A standard repayment plan is ten years. As you map out your strategy, determine if this timeframe is feasible.

If financially possible, plan to make larger or more frequent payments when you can. For example, consider putting that money toward your student loan if you receive a bonus or a tax refund. One of the most effective ways to tackle your student loans is by creating a budget and using it as a tool to boost the success of your repayment plan.

Creating a post-graduation budget

If you’ve landed a job right out of college, you are probably excited about the employee benefits and predictable paycheck as you begin to strike out on your own. With a regular income, it can be easy to start spending money more freely. Before spending gets out of control, create a budget or update the one you have from college. This is the time to audit your college lifestyle and be more mindful of where your money goes by establishing savings goals and spending limits.

How do you budget your finances after you graduate?

With today’s technology, several budgeting apps can help make managing your money much more straightforward. Plus, you can organize your spending into categories, set goals and spending limits, create bill pay reminders, and gain a detailed view of your expenses. For example, if you start a plan to repay your student loan, you can automatically put money toward this target each month.

Regardless of how you create your personalized budget, use this tool to optimize your income, reach your savings goals, and create a more secure financial future.

Should recent graduates get a credit card?

When used carefully, credit cards can be a positive way to build a credit history and score, which will be necessary to purchase a car or home. If you don’t have a credit card, now may be a good time to apply. Do your research and look for a credit card with low annual fees. You may also wish to choose a plan that earns rewards or cash back on everyday purchases. You can begin by paying for groceries or gas and then paying off your monthly balance. This allows you to build good financial habits and avoid overspending or increasing unnecessary debt.

Starting a 401(k)

Along with a steady paycheck, joining the workforce may also allow you to begin saving for the future. As part of the employee benefits package, many employers offer 401(k)s, where a portion of your paycheck automatically goes into this retirement account. Several organizations also offer a company match to an employee contribution to further increase your retirement savings. When signing up for your 401k, you’ll need to consider your time horizon, risk tolerance, and tax implications. A financial professional, or your company HR professional, can help you determine an appropriate path for you. What’s more, you can take your 401(k) with you if you change jobs, so all that you’ve contributed to your account and its earnings will remain with you.

Investing for the first time

The 401(k) through your employer is an excellent introduction to investing, but there are other opportunities to build a nest egg. Even if you only want to allocate a small amount of your income toward these goals, you can begin to develop your financial portfolio. An IRA, high-yield savings account, CD, bond, or mutual fund may be worth investigating. If you’re interested in exploring investing, meeting with a financial professional can help you choose which option is right for you and determine an overall strategy that will allow you to accomplish your short- and long-term goals.

Finding a financial professional

As you start on your post-grad path, having a trusted resource for financial advice and guidance can be very beneficial. Connecting with a financial professional after graduation can allow you to capture a financial snapshot of your current situation and then map out a plan for achieving your goals in the next year, five years, and so on. They can help boost your financial knowledge so you can adopt healthy money habits and make well-informed financial decisions. Most importantly, you will have someone you can count on to help you adapt your financial plan and budget as your needs and goals change.

Adopting money management skills

Switching gears from student to career professional can be exciting and sometimes stressful. Practicing mindful spending and learning new skills that promote financial health can help you lower stress levels and put you on the right track toward achieving all you wish. Here are a few tips to help you launch your post-grad life:

  • Establish an emergency fund
  • Monitor your credit score
  • Consider an employer-sponsored healthcare plan or flex account
  • Eliminate unnecessary spending and subscriptions
  • Automate your bill payments and transfers to savings

With your college days behind you, it’s time to launch into a new era filled with possibilities. The more effort you put toward improving your money knowledge and prioritizing your finances, the better off you will be in the coming years. Here’s to your bright and financially fit future!

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The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.

1 Enterprise Data Warehouse, Direct Loan Portfolio by Borrower Debt Size, March, 2023. Found via StudentAid.gov.