Smart Savings Strategies for Life After Graduation

Graduating from college is an exciting and life-changing accomplishment and milestone. Whether you just graduated from a technical school, a private university, or graduate school, your newfound freedom from school also brings life-changing decisions, such as what job you’re going to accept, where you’re going to live, and so many more. One of the most important decisions you need to make as a graduate is how to manage your finances. How you handle your money in the way you save, pay off debts, and invest not only impacts you now, but will for the years to come.

As you begin to enjoy life as a graduate, we want to share with you some financial strategies that can help you transition into this new season. Whether you have been managing your own finances since high school or you’re just beginning to manage them on your own, we want to give you some pointers to prepare you as you move forward in your journey.

How Can You Create a Budget That Works for Life After College?

The very first step to your financial wellness after graduation is creating a budget. Budgeting is an essential piece to the foundation of your financial well-being by keeping your money organized and designated to specific roles. Just as you likely put hours into studying and working on projects to complete your degree, it takes time and dedication to be financially healthy and meet your financial goals, such as buying a house or purchasing a new car. Here are some components that you should consider when creating your budget:

1. Try out the 50/30/20 strategy.

The 50/30/20 strategy is a way to help you navigate how to split up your monthly budget, with 50% of your money going to your needs, 30% going towards wants, and 20% going towards savings and debt. While you could strictly stick to the exact percentage of each category when allocating your money, you can also use this rule more as a reference to get your bearings of how to handle your finances, especially if you’re new to managing money on your own. There will be times when you will try to spend more of your wants than your needs, so you’ll need to cut back on discretionary spending. However, you may be more of a natural saver and increase the percentage of how much you want to save and need the reminder that it’s okay to use your money for a fun movie night or weekend trip. No matter what kind of spender you are, the 50/30/20 strategy is a good starting point for you to begin managing your money.

2. Consider All Your Necessary Expenses

As you build your budget, you need to know everything you’re responsible for financially. Tally up all your expenses that you’ll need to account for, such as:

• Rent for an apartment

Be sure to check out Apartments.com and Zillow to find the best deals as you look for your new home. You’ll want to be able to compare amenities, pet deposits, and fees.

• Gas and car maintenance

Our cars are essential for our transportation needs. Since we highly depend on them in our daily lives, it is important that we are ready to pay for any unexpected expenses for maintenance like a flat tire or broken headlight. Gas is another significant expense we have to consider, especially if your job requires you to travel extensively. As you calculate this section of your budget, it is helpful to know what gas stations have fuel points. Some rewards systems to look into are Kroger, Pilot Flying J, Huck’s, and Sam’s Club.

• Health, auto, and life insurance

Insurance is essential as you enter full financial independence. If you’re still on your parents’ insurance, you’ll want to get a game plan for when you will transition to your own. It is important to know what insurance plans your employer does or doesn’t offer, so you can know what you need to be covered.

• Groceries

As food prices continue to climb, it can be overwhelming accounting for how much you spend on groceries per month. It’s important to know which stores will provide you the cheapest options as you begin to shop for yourself, but also to prepare you for any current or future family who will be depending on you for their financial needs. Financially smart grocery shopping will help you to have self-control when you’re in-store to encourage you make wiser decisions that won’t hurt your budget. Aldi is a great option for the cheapest groceries, especially if you’re just buying for yourself. If you’re wanting to buy in bulk or have a larger family, you’re most likely to find the best deals at Walmart and Sam’s Club.

These are just some of the expenses you will need to consider in your budget. You’ll also need to think about:

• Utilities
• Phone bills
• Taxes
• Dependents
• Student or car loans

3. Be Ready for Student Loans

Debt is a barrier that keeps you from moving forward in your financial future, so you want to be as ready as possible for paying it off quickly and wisely. Typically, you have to start paying off your student loans six months after graduation, so it’s helpful to have your budget ready-to-go beforehand.

4. Write Down Your Goals

While graduating brings a lot of new financial responsibilities to think about, you shouldn’t forget about your dreams of traveling, purchasing a new car, or decorating your new home. Having good financial habits in place to manage your money well doesn’t prevent you from these goals; they help you to reach them! A useful tip to knowing your goals is to write them down and give yourself a timeline. Use a savings goal calculator to see what you’ll need to contribute to reach your ambitions.

What Are Some Ways to Tackle Student Loan Debt Effectively?

One of the obstacles that will get in the way of you being able to reach your financial goals is debt. Since you must prioritize making a consistent and possibly hefty payment every month, that is money that isn’t being put towards your savings. That’s why tackling your student loan debt after college is so important. You should be able to enjoy your life as a graduate with as little financial stress as possible, so here are two strategies for how you can manage your debt effectively:

Debt Consolidation

If you have multiple debts apart from your student loans, debt consolidation might be a good choice for you to keep your payments from being too overwhelming. Instead of having your loans spread out across multiple payments, you combine all of them together into one.

The Snowball Method

Unlike the debt avalanche where you pay of debts with the highest interest, the snowball method is when you pay off smaller debts first one-by-one. This creates a more realistic approach to paying off your debt since you’re not trying to pay off substantial loans right as you’re entering life as a graduate.

Is It Better to Save Money or Pay Off Debt First?

So, should you be focused more on saving money or putting it towards paying off your student loans as quickly as possible? The truth is you are going to do both simultaneously. When it comes to managing your finances, there will be some gray areas where you’ll be able to discern which step is best for you. Saving money and paying off debts are one of them. There isn’t anyway around paying off your student loans, and you also need to save your money for essential things like a house, car, and retirement. Before you begin to move forward in any of your financial decisions, the first step you need to take is establishing an emergency fund. These are absolutely necessary for your financial security as you pay your student loans and save.

How Can Graduates Balance Having Fun and Saving Money?

You may be thinking, “Now that I’m graduated, I can’t have the same amount of fun and flexibility as I did when I was in college.” While there are many more responsibilities you have as an adult who is working full-time, it doesn’t mean you won’t be able to have fun anymore. You now have the freedom to make your own choices of how you want to move forward with your financial journey. Wanting to purchase that vehicle you’ve had in mind? Have a charity you’ve been wanting to partner with financially? Ready to go on a relaxing vacation? All these ambitions you have are now your decisions…it just takes good financial stewardship on your part to bring them to fruition.

Save Smartly After Graduation with Leaders Credit Union

Is graduation quickly approaching, or are you a recent graduate? You might be uncertain how to manage your student loans, savings, and more. At Leaders Credit Union, we want to help you navigate this journey and be your financial champion. For more tips on how to save, look at our free Beginner’s Guide to Establishing Savings.