Being fresh out of college is both exciting and scary. Exciting because you’ve just landed your first real job and can support yourself independently; also scary because you’ll still need to manage a tight båudget, pay off student loans, and do everything an adult is supposed to. It’s a big transition from being financially dependent on your parents to being financially responsible for yourself. You probably won’t become a millionaire from this article alone, but these tips are great ways to get started on the right foot when it comes to your personal finances.
1. Automate your savings ASAP
The sooner you can build up your savings account, the more flexibility you’ll have in case of an emergency. The best way to start saving as soon as possible is to automate your savings. Decide what amount you want to save every month and have that money automatically go into a savings account, preferably with low or no fees. This way, you won’t even have to think about it. If you’re lucky enough to have a job that offers a 401(k) retirement plan, you should take advantage of that. A 401(k) is the best way to start saving for retirement because you can get a head start on earning compound interest. Employer match money is free money you don’t want to turn down!
2. Start a side hustle
There are a lot of benefits to having a side hustle. Having a side hustle can help you get your foot in the door to the field you want to go into and can be an excellent way to gain some extra experience and connections. It can help you build your resume and acquire new skills, it can be a great way to make some extra money, and it can help you become more financially independent. There are many ways to make money outside of your 9 to 5. For example, you could tutor, host Airbnb guests, teach yoga, or sell products through e-commerce. No matter what you decide to do, having a side hustle can help you become financially independent and have more control over your time and income. A side hustle can be a great way to make some extra money.
3. Start investing ASAP
You’ve probably heard the term “time is money” before. It’s true: the earlier you start saving, the more time you’ll give yourself to grow that money into something substantial. Investing is definitely not a short-term plan. It can take years to really start seeing a return on your investments, but it’s worth it.
4. Consolidate your school loans ASAP and pay on time every month
One of the biggest mistakes you can make is to ignore your student loans and hope they’ll go away. Instead, start paying them off as soon as you can. If you can manage to start paying them off before your grace period ends, do it! If you have federal student loans, you have a variety of options for repayment. You can choose to pay them off all at once, or you can make monthly installments. If you have a few different loans at different interest rates, it might be a good idea to consolidate them all into one loan to create a repayment plan that works for you. A little sacrifice now will go a long way toward financial freedom in the future.
5. Create a passive income stream
Passive income can be a great way to help you generate extra cash flow, whether you’re running a side hustle or just trying to get a little extra dough each month, especially as inflation rages throughout the economy. Passive income can help you earn more during the good times and tide you over if you suddenly become unemployed, if you voluntarily take time away from work or if inflation keeps chipping away at your purchasing power.
6. Begin Building an Emergency Fund
You never know what life will throw at you. You might have to take time off from work to care for a sick relative, your car might break down, or your AC unit might break and need replacing. The best way to be prepared for any of these situations is to start building an emergency fund. A good rule of thumb is to save up enough money to cover three months’ worth of expenses. That way, if something does go wrong, you’ll have the money you need to get by until things get back to normal.
With a little bit of effort and dedication, you can make your first year out of college a successful one. These six tips will help you make wise money decisions and avoid costly mistakes common among new grads.