You've finally graduated from university! You might be one of the lucky ones that get a job right out of university, or you might not be as lucky. Whatever, the case may be, no one told you that adulting would be this hard. You suddenly have to start paying all these crazy bills, including your student loan (if you have one), and have to start thinking about crazy stuff like getting married ... or even having kids. *Shit just got real*
There are lots of things I wish I was told about money and adulting when I first graduated. A year after my graduation, and there are 4 things I know now, that would make your life much easier as a new grad:
1. Treat Your Credit Card Like A Date That's Too Good For You
Credit cards come with a lot of problems and responsibilities and must be handled with care (Trust me, I learned the hard way). Yes, it's nice to have a "cash advance" before you actually get paid and credit cards are also a good way to build your credit, but you have to understand that
With the average credit card interest rate of about 20% credit card debt can come back to bite you in the ass and can be the biggest debt of your life! Needless to say, You have to be aware of your credit card terms and spending limits and be sure to make at least the minimum monthly payment each month (although I suggest that you pay it in full if you have the means).
In short, treat your credit card with love, respect, and admiration – like a date that's too good for you!
2. No One Cares About Your Fancy Car That You Can't Really Afford
*Okay almost no one*
When you get your first job after uni, It's easy to swipe your credit card at all hours of the day; simply because you can afford it.
You buy into lifestyle inflation. You move out of your parents house and start paying an exorbitant amount of money for rent so you can live in a fancy condo; you buy a car that costs more than you make in a year because all your friends have nice cars etc. But no one really cares about your car that you can't really afford. You're the only one that has to spend 30% of your income covering your car payments, insurance, and also 50% of your income on rent. You're the only one that has to deal with your credit card debt and has to eat ramen for dinner like 5 days a week.
It's much better to live below your means and save up for emergencies, retirement, or just for a well deserved holiday! Don't be one of those guys/ girls that drive a $70,000 BMW and has to ask for $500 to fix the car. Just. don't.
3. Time Is Your Biggest Ally
Once I graduated from university, I started trying to get my finances together, thinking if I would ever be able to afford a house of my own, or my dream car. It can all be overwhelming. If you're just graduating from university, chances are you're in your early twenties meaning you have time to prepare for all this – so, chill!
You're young and you have time to save for all these important things, and the magic of compounding makes this easy (especially if you invest) . But you need to take advantage of the time you have and start saving as much as you can afford to.
So don't worry yourself to death thinking if your dream wedding or car will ever become a reality, instead start with what you have and save when you can. The only way you can do this is through realistic budgeting.
When you get your first full-time job for the first few months you're excited that you're getting paid. But after a while you start wondering, "That's it?!". But you don't have to only rely on money you make from your full-time job. Guess what?
There are a billion ways to make more money in your free time. One way I make extra income is by helping people write resumes and cover letters when I have some downtime or just need extra cash to buy something cute.
But other than making more money; it is important to diversify your income sources, as your job is no longer guaranteed (not in this economy, at least).
Find what you're good at and try to make extra money from it.
"Are you on a laptop all day? Would keeping an excel file or Google doc file help you track your expenses easier? Would it be more convenient to keep an old fashioned pen and paper type of budget? How about keeping a running tab on the fridge so that you are tracking all expenses?
"For the few that actually look at their goals again, it’s common to revisit them only at the end of the year. This is a crucial error. As our circumstances may change day to day and month to month, so will our goals. A lot can change in twelve months, which is why I propose reviewing once a month, or at the very least every three months.
Revisiting also keeps our desires relevant. It’s helps us remember that we even have them. Ideas aren’t enough, we must execute.
As the great Thomas Edison said, 'Vision without execution is hallucination.' " -Jiu-Jitsu Finance
Increasing your income
"After you have lowered your expenses, it is time to bring in more income. There are many ways to bring in more income especially during the holiday season. Maybe your full-time gig will let you work extra hours for overtime. In addition, retail stores typically hire for the holiday season. That part time holiday gig could turn into a longer gig...
Retail jobs aren't the only part-time jobs available. There are plenty of other side hustles you can pick up right at home to make extra money like: Freelance Writing, Virtual Assistant, Social Media Management." -Financially Fit & Fab
Turn on your automatic savings
"Another no-hassle way to save is by setting up an automatic transfer to your savings account. By automating your transfer, you're making sure that you don't forget or pay your savings last–and as a bonus–automating your savings means you never "see" that money and subsequently makes it sting a little less.
Two new apps that I am loving lately are Digit (which has a cult following). It automatically transfers money from your checking account you won't miss. I also love Qapital, which has rules you can set to "save the change" from your purchases. I saved over $75 my first month of Qapital, which was really astonishing to me. Click here to give it a try." -Financial Best Life
Develop the habit to spend with cash than card
"To spend with cash is also an actionable way to get out of debt. According to the research on peoples spending with credit cards; it was revealed that those who shop with credit card are impelled to spend more on luxury items because they feel they are paying with “play or fun money”. In other words, people who shop with credit card spends more than required.
Evidently, finance advisors hold a strong stand on this. They strongly advise that people who are working on eliminating their debt should cultivate the habit of spending cash, to avoid being tempted to spend on irrelevant items." -MoneyMiniBlog
Leave your wallet in the car when shopping
"This trick is simple but impactful. When doing any kind of shopping, use cash, and only take the amount of money you want to spend in the store with you. Leave all other cash, credit cards, and debit cards in the car.
This is very powerful, especially when grocery shopping. In addition to the amount you plan to spend, you can consider bringing in a small cushion of a few dollars (in case there are hiccups at the register). You will shop (and spend) completely differently when you only have a hundred dollar bill with you versus a hundred dollar bill and your debit and credit cards.
Don’t give yourself a way to spend more money than you want to — and you won’t." -Hope + Cents
Start and maintain an emergency fund
"There is no fixed formula for how much you should have in an emergency fund. Some school of thoughts say 6 months’ worth is sufficient, some say a year’s worth. Everyone’s situation is different and as such, each strategy should differ. To start however, I would suggest understanding your spending habits, and then implementing a 3-6-9 guideline.
3 Months: If you are single without kids, renting, no car, partially dependent on parents for income or any combination of these factors, start off with a target of 3 months’ worth of expenses for a rainy-day fund.
6 Months: Married, kids under 18, own a house or condo, own at least one car, or any of these combined, the base target should be 6 months’ worth of expenses (if married, base it off the income of the highest earner).
9 months: Self-employed, freelancers, anyone with a volatile job or unpredictable paycheck, 9 months’ worth should be the benchmark." -Investment Conversations
How students should avoid the debt trap
"The easiest way to prevent yourself from falling into the debt-trap is by living within or below your means (that is, not overspending). In addition, it is necessary to do research before getting credit cards (or signing any contract to take on loan/ debt) so that you really understand how it works. As a student, you must learn to treat your credit card with respect." -Investment Conversations
Build a budget and stick to it
"There are many free apps available to help you track expenses, but I always prefer using my own spreadsheets. That enables me to have the most control over what I’m doing. I understand that being able to access your spreadsheet on your phone makes tracking significantly easier, which is why I prefer Google Sheets over Excel. You can download the Google Sheets app and pull up your expense tracker wherever you are to input a transaction or monitor your spending. By combining the expense tracker as separate tabs within the same spreadsheet as the bill tracker, you can have all your finances in one easy-to-access location." -The Budget Boy
Create an automatic savings account for travel.
"Here's how this automated system specifically works for you and your travel fund. Once it's set up, it goes like this:
-Your checking account receives income.
-The next day, your checking account automatically transfers money to a separate (different bank) savings account—aka your travel fund.
Know Your Interest Rates
If you have anything that you are making payments on every month, you need to know how much interest you're paying. Make sure you know these numbers, too. Ideally, you'll want to pay debts down that have a higher interest rate first. However, there is another school of thought out there that suggests paying the bill with the lowest balance first. I'd say either way is fine as long as you're making progress and as long as the higher interest rate stuff isn't astronomical.
Action: Look at your statements or call the companies to get your current interest rates on all monthly obligations.
Negotiate Lower Interest Rates
If, by chance, you ARE paying astronomical interest rates on any of your liabilities, call and try to negotiate a lower rate. Oftentimes, if you've demonstrated a history of paying on time, the company will work with you to reduce your rate. The only trick is, you have to ask.
Action: Know your numbers and call the companies to negotiate if you're paying high interest rates.