6 Best Financial Strategies for College Graduates

If you are a college graduate about to begin your first job, get your post-academic life off to a good start by making smart financial moves. Here are six of the best financial strategies for college graduates.

Keep your living costs low. Even if you have landed a full-time job with benefits and a decent salary, don't rent a pricey apartment in a luxury building, buy a new car or generally live large and spend all the money you have coming in. A lot can happen in your first years out of college. You may change jobs, decide to move to another city or want to return to school for a graduate degree. Keeping your expenses down will give you more flexibility to make changes and pursue your dreams.

Analyze your student loan debt. If you have student loans, evaluate how much you owe, when payments will start, and how much they will be. If you have federal loans, you may have several payment options (although usually the default payment plan is level, or the same payment, over the life of the loan). If so, evaluate your situation and decide which is best for you. For example, level payments may make sense if you have adequate income to easily cover them, but, if not, and you expect your income to rise in the future, perhaps graduated payments that start low and increase over time would make more sense for you. Check with your lender or loan servicer for your repayment options.

Create a budget. As a new grad, it may be difficult for you to estimate what your living expenses will be, but take a stab at it and then fine tune your budget once you have more information based on your actual spending. A budget doesn't have to be complicated, but even a simple one will give you an idea of the flow of money in and out each month, and that can help you make wise spending, saving and investing choices.

Get health insurance. If you can get health insurance through your employer go for it. If not, you may be able to stay on your parents' health insurance policy for the time being. Otherwise, purchase your own policy. Yes, it may seem like a waste if you are rarely sick, but, in the event of a serious accident or illness, it could save you from financial disaster. If you want to minimize your monthly premium payments, choose a high-deductible plan, but only if you have the discipline to save enough money to pay the deductible in case you need to. Also, while you are thinking about health expenses, find out if your employer offers a flexible spending account for health care expenses. If so, sign up, since this plan will allow you to set aside money pre-tax for health care expenses.

Start saving for retirement. You may feel that you can safely put off saving for retirement, since it is decades in your future. In fact, that is one of the best reasons to start now. The longer your retirement account has to grow, the bigger your ending balance is likely to be, so get going. If you employer offers a 401(k) with an employer match, start by taking advantage of that. If not, look into a traditional or Roth IRA.

Begin putting some money aside for emergencies. Even if you can only set aside a small amount each month, start saving money for emergencies. You will be glad you did if your car breaks down or you are faced with unexpected medical bills.

Source:

Deborah Fowles, financialplan.about.com, Five Smart Money Moves for New College Graduates

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