Ways to help avoid common financial mistakes after you graduate

Congratulations! All your hard work and dedication paid off and you’re headed into the world with your college degree. Stepping into your post-grad life can feel a little overwhelming and you may have questions about getting started on the right financial foot. For a smoother transition from student to full-time employee, here are several tips you can follow now to create a bright financial future.

Create a personal budget

If you’ve landed a job right out of college, the financial security of a regular paycheck and employee benefits is probably sounding pretty good. With regular income coming in, it can be easy to start spending money more freely. To avoid overspending and racking up debt, create a budget or update the one you have from college. This can be a valuable time to establish savings goals and spending limits and gain a deeper understanding of your finances.

Budgeting your finances after you graduate

With today’s technology, several budgeting apps can make managing your money much more convenient and 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. If you create a goal to repay your student loan, for example, you can automatically put money toward this target each month.

You can also maintain your budget using a spreadsheet and tracking your expenses through bank and credit card statements. Whatever you choose to create your personalized budget, use this tool to optimize your income, reach your savings goals, and create a more secure financial future.

Getting a credit card

If you didn’t have a credit card during school, now may be a good time to apply for one. When used correctly, credit cards can help you build a credit history and credit score, which will be necessary to purchase a car or home in the future. 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 balance each month. This allows you to build positive financial habits and avoid overspending or increasing unnecessary debt.

Begin paying off your student loan

Graduating with student loan debt is becoming increasingly common in this country, where nearly9.9 million borrowers¹ have between $20,000 and $40,000 of student loan debt. If you’re among this group, you likely need to create a plan for paying down your balance. By creating a personalized strategy that aligns with your budget, you can help minimize the financial burden of student loans and get your debt paid off in a shorter amount of time.

In some instances, 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.

Create a student loan repayment plan

Most lenders allow a six-month grace period after graduation before your first student loan payment is due. If possible, begin payments during that period, 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. Many repayment plans last 10 years. Determine if this timeframe is feasible as you review your budget and map out your strategy.

When possible, plan to make larger or more frequent loan payments. If you receive a bonus or a tax refund, for example, consider putting a portion of that money toward your student loan. 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.

Sharpen your money management skills

Entering a new stage in your life can be an exciting, but sometimes stressful time as you adjust to new responsibilities and expectations. Practicing mindful spending and learning new skills that promote your financial health can help you lower stress levels and put you on the right track toward achieving your goals. Here are a few tips to help you kick off your post-grad life:

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

Contribute to a 401(k)

Joining the workforce not only brings in a steady paycheck, but often allows you to begin saving for the future. While retirement may seem like a long way off, experts recommend saving early and often.

As part of the employee benefits package, many employers offer 401(k)s where a portion of your paycheck will automatically go 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.

Explore investing

Even if you’re new to investing, many options can help you build your financial portfolio and create assets for retirement. Remember, the sooner you begin saving, the more time you have to grow your funds. Consider an IRA, high-yield savings account, CD, bond, or mutual fund. 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.

Partner with a financial professional

Having a financial expert in your corner as you start on your post-grad path can help you strengthen your financial knowledge and give you a go-to resource for guidance and advice. Connecting with a financial professional also allows you to review your finances through a fresh lens and determine a plan of action for achieving your goals for your first year out of college, learn what options are available to you to help you reach your goals, and explore your financial options.

As your financial understanding grows, you can continue to adopt healthy money habits and make well-informed decisions about your finances. 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 in the future.

With a new era beginning, there are several opportunities to create a strong financial foundation to further build your life upon. As you continue to grow your knowledge and make your savings goals a priority, you set yourself on a path toward financial freedom and success.

Neither North American Company for Life and Health Insurance nor its agents give legal or tax advice. Please consult with and rely on a qualified legal or tax advisor before entering into or paying additional premiums with respect to such arrangements.

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.

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