With so much focus surrounding the student loan debt crisis many new graduates often forget to consider other important aspects of their finances. From budgeting to retirement planning, your first steps off the graduation stage should be well planned with financial goals in mind.
Budgeting and Expense Tracking
One thing most of us could do better at is budgeting and expense tracking. Budgeting is crucial for keeping you within your spending limits. it is near impossible to save money or get ahead of your bills if you aren’t watching where those extra dollars are going each month. By setting budget limits for categories like groceries, entertainment, and dining out you can prevent yourself from over spending in these common areas. Keeping receipts and balancing your expenses against your account balance can help you identify areas that are problems for overspending or even single out items you can cut back on.
Savings and Emergency Fund
If you are budgeting correctly you should have a set amount you are saving each month as a priority expense in your budget. Many banks offer automatic checking to saving transfers each month to take the guess work out of your hands. By having your money automatically moved to savings, you can ensure you don’t spend it elsewhere. Having a general savings account is important, but so is an emergency fund. The difference is that an emergency fund is created for the purposes of covering bills in the event you lost your job or couldn’t work. Ideally, you want to set aside three or more months worth of expenses to help you meet your financial obligations during a time of need.
As a new college graduate you may not be thinking of your golden years just yet, but you should certainly be saving for them. If you were to start saving for retirement at the age of 25, putting $2,000 a year into an account yielding an average of 8% you would have roughly $560,000. Wait until your 35 to start that retirement fund and you’d have only $240,000. So you can see the importance of saving what you can as soon as possible. If you are fortunate enough to have an employer that matches 401(k) contributions, elect for the maximum and take a slight reduction in your paycheck. If your employer doesn’t offer a 401(k) sign up for a Roth IRA and contribute as much as you can. Saving $4,000 a year (around $300 a month) can set you up to be a millionaire at retirement.