With college graduation and looming adult financial responsibilities ahead of you, consider these seven smart money moves that can put you ahead of the game. Setting yourself up for financial success before you walk across that stage may be one of the best choices you make.
1. Gather Your Documents
If you are about to launch into the world on your own, make sure you get all of your necessary paperwork from your parents. This includes things like your:
- Birth certificate
- Social Security card
- Insurance cards (car, health and dental, for example)
- Vaccination records
- High school diploma
You'll soon find yourself in financial situations, like applying for apartments and credit cards or filling out a W-4 at your new job, where you may need access to these documents. If they are still in a box in your parents' garage halfway across the country, it could delay your plans.
2. Understand Your Student Loan Repayment Details
If you took out student loans, you'll need to get ready to start repayment. While you'll have a grace period with most student loans, it's important to understand your repayment terms, payment due dates, when your grace period ends and your minimum payment requirements.
You may feel more confident if you have a plan for repayment already set up. Also, consider repaying all accrued interest on unsubsidized loans now. If possible, doing so before your grace period ends makes sure that amount is not added to your principal once the period ends, increasing your loan amount and payments.
3. Begin Building Credit
Credit is something you build by adding tradelines, or accounts, to your credit report. These might include loans, credit cards or even utility payments. Credit reports are compiled by the three national credit reporting agencies: Experian, TransUnion and Equifax.
If you have a student loan, you'll have already begun building credit. Adding a credit card if you don't have one is a good way to expand your credit mix and take advantage of perks.
Establishing and maintaining a healthy credit history can help you achieve other financial goals. Sometimes your credit report may be used to help qualify for an apartment or during the job application process for certain types of jobs, and can help you buy a car or a home down the road.
4. Begin Applying for Jobs
Depending on your financial situation, you may need to start applying for jobs several months before graduation. This can help to line up a position and have income as soon as possible after graduation. Consider taking advantage of on-campus aids like the career center while you're still there to get your resume on point.
The average amount of time spent unemployed is just over 20 weeks, according to the Bureau of Labor Statistics, so expect your job hunt to take some time. Be prepared to either apply early or have enough savings to bridge the gap between graduation and getting hired.
5. Find an Affordable Place to Live
If you thought leaving the dorms or your college apartment meant leaving behind roommates, hang on. Finding an affordable place to live right out of college may mean living with roomies or family.
This is an important financial strategy, though. Rent often takes up a large chunk of your income—and usually a higher percentage when you're just starting out.
But to be truly affordable, experts say housing costs shouldn't take up more than 30% of your monthly paycheck. If you have the opportunity to cut rent costs by living with friends or family, consider doing so to max your saving abilities while you get on your feet.
6. Start Saving
If you have the means to start saving money before college graduation, do so. An emergency fund is essential for an independent adult.
Aim for an achievable ballpark number to begin, such as $1,000. Then consider saving what you expect three to six months of your post-grad expenses to look like. Factor in living expenses, cellphone bills, groceries, minimum payments on your debts and any other necessary costs. Having emergency savings in place will help when an unexpected expense arises, such as a car repair, and help you avoid racking up debt to pay it. Just commit to not touching it except in case of emergency.
Once you've started a saving habit, think about opening a high-yield savings account or Roth IRA to stash some extra money. Both types of accounts can help you get a good return on your savings. High-yield accounts are best for short-term savings, while Roth IRAs are geared toward retirement savings.
7. Protect Your Identity and Digital Financial Health
As you begin opening more official "adult" accounts like bank accounts and utilities, take steps to protect your identity. Practice safe digital behaviors like using different passwords across accounts and not staying logged in to financial accounts on apps.
Be careful when responding to ads for things like apartments. You should never have to pay money upfront for a place you haven't seen. As you navigate more financial particulars as an adult, it's important to develop an awareness of fraud and scammers and how to avoid them.
Get Your Degree in Personal Finance
For many young adults, college graduation is a turning point in their financial lives. If you are about to launch into the world financially independent for the first time, it is important to be prepared and have an action plan to protect yourself.
Staying dedicated to saving, living within your means and building your credit can help you achieve some of the long-term goals you have, such as traveling or owning a home. In the short term, it may mean putting some effort into creating a healthy financial foundation, but this can pay dividends over your future.
Give yourself a boost at this pivotal moment with the Experian Boost®ø feature, the simple way to add things like your cellphone or streaming service bill to your credit report. Now when you need good credit the most, you may get additional points just for paying your regular bills on time.