Over the course of four years, college students work hard to make the grade – both on finals and their futures. Yet many still feel underprepared to manage their finances after graduation. Plus, recent grads often don’t have the credit history needed to make important financing decisions – like buying a car, taking out grad school loans or signing a lease. To navigate the transition from student life to adult life and establish long-term financial security, VantageScore has 5 tips that will help you school the first few years of adulthood:
1. If you want to be a millionaire, take advantage of retirement lifelines. It’s never too early to start thinking about retirement. In fact, the sooner, the better. This is how Money Under 30 puts it:
“Let’s say a 20-year-old begins plunking down just $45 a month with a 50 percent company match. If she raises contributions by the same amount as any pay raises she gets, she’ll have more than $1 million by age 65. That assumes annual raises of 3.5 percent and an 8.5 percent return on 401(k) investments.”
Many companies offer the option to deposit a percentage of your paycheck into your 401(k) retirement fund, and many even match the contribution, which doubles your savings contributions. If your employer does contribute to your 401(k), make sure that you contribute the amount needed to get your employer’s match. Depending upon your employment situation, other retirement saving options may be more appropriate such as a Roth 401k, IRA, or Roth IRA, so be sure to consult a financial advisor about the best option.
2. Rack up the post-student discounts. The days of using your student ID for deals is sadly coming to an end. But don’t worry – there are other benefits to look forward to. From partnerships with local gyms to cell phone bill reimbursements to transportation benefits, be sure to inquire with your employer about support they offer. The little extra effort – for things you likely pay for anyway – goes a long way and quickly adds up in the end. There are also shopping reward programs through your bank and other third parties, like Ebates. The general rule about discounts: you won’t know if you don’t ask!
3. Consider opening a credit card that rewards you. Whether you’ve caught the travel bug or are a budding foodie Instagrammer, you can open a credit card that gives you points for your purchases. Using a credit card and paying it off regularly is one way to strengthen your credit score and open up future options and benefits down the road. But keep in mind the golden rule of credit cards: only charge what you can pay back, and pay off your bill regularly – either by getting in the habit or even scheduling regular payments through an app or website.
4. Know how much you need to pay and by when. Student loans, credit card bills and post-graduate expenses – like security deposits, first apartment decorating and welcome-to-the-city happy hours – are all worthwhile investments, but can add up quickly and unexpectedly. Stay aware of how much you owe and your schedule for a minimum payment. For example, most private and federal loans have a six-month grace period between graduation and the day you need to make your first minimum monthly payment. With skilled budgeting and prioritizing, loans can be paid off ahead of schedule by increasing your monthly payment or paying lump sums – like with your tax return. In the long run, this could help you save money on interest and potentially boost your credit score.
5. The piggy bank is making a comeback. Much of the secret to financial success is planning for the unexpected. Instead of depending on last-minute loans and the impulsive opening of new credit cards, you can use an emergency fund to help to cover unexpected costs and make the transition from student to independent adult more manageable. Whether it’s a car accident, an injury, or a broken computer, having an emergency fund established as a precaution allows you to pay these bills and not lose sleep.
Initially, the transition from student to full-fledged independent adult can be daunting. But, by practicing discipline when it comes to financial decisions and not sweating the small stuff, you can graduate into the school of smart financial planning.