Congratulations, graduates! As you step out into the world beyond campus, armed with your degree and a wealth of knowledge, it’s crucial to also equip yourself with the tools to navigate the financial landscape ahead. Here are some wise financial moves to consider as you embark on this new life stage:
Commit yourself to living for the Lord
Alright, this isn’t a financial suggestion, but it is the most important suggestion on the list! As you begin this new stage of life, commit (or recommit) yourself to the Lord. Starting a new job, moving to a new city, balancing more complex finances and other situation call for prayer and a decision to be faithful each day with the time, resources, and opportunities God gives you. Proverbs 3:5-6 says “Trust in the Lord with all your heart and lean not on your own understanding; in all your ways submit to him, and he will make your paths straight.” No matter what new adventures or challenges you face, the Lord is with you!
Create a Spending Plan
That’s right – the “B” word, budget! Having a spending plan or budget is maybe the most important financial move you can make, at any stage of life. Following a spending plan not only can help make sure you are spending less than you make, but it puts you in the driver’s seat, controlling what you spend your hard-earn money on. Start by understanding your income and expenses. If you don’t know your expenses, track them for a few months to discover your common expenses. Make a budget that includes essentials like rent, groceries, utilities, transportation, and loan payments. Allocate a portion of your income for savings and discretionary spending. Stick to your spending plan to avoid overspending and build good financial habits from the outset.
Save an Emergency Fund
Initially, your budget should include savings for an emergency fund. Saving three to six months’ worth of living expenses in your bank account will allow you to cover unexpected expenses like medical bills, car repairs, or sudden job loss. Not only will having this financial cushion prevent you from relying on credit cards or loans during tough times but it will provide peace of mind, which is priceless.
Manage Loans
Chances are, you will have graduated college with a degree and student loan debt. In fact, the Federal Reserve indicates that of recent graduates, 58% have student loans . You may also have other debts like credit card debts or auto loans. Understand the terms and repayment options available to you. Create a repayment plan that fits your budget and consider making extra payments when possible to reduce the interest accrued over time.
Invest for Retirement
As you begin your first career job, as the Human Resources department if there is a 401(k), 403(b) or other retirement plan. It’s never too early to start saving for retirement, in fact the earlier you start saving for retirement the better since you’ll have the power of time and compounding interest on your side. Contribute whatever you can to the plan, especially if your employer offers a matching contribution. This is free money for your retirement so try not to leave any on the table! If your employer doesn’t offer a retirement plan, consider opening an IRA and contribute regularly.
Live Below Your Means
We mentioned this in the suggestion about having a spending plan but it bears repeating. Avoid lifestyle inflation that often accompanies a salary increase like a shiny new job. Just because you’re earning more doesn’t mean you need to spend more. Instead, focus on paying off debt and saving and investing for your future goals, whether it’s buying a home, traveling the world, or starting a family.
Invest in Yourself
We get it, you’ve just finished 4 or more years of education, your brain may feel done! But being committed to lifelong improvement is one of the best things you can do for yourself. Keep learning about your field, learning new soft-skills like public speaking, find a mentor, get regular sleep and exercise. Investing in yourself might lead to higher earning potential and career advancement opportunities, but having an active mind and a healthy body is also it’s own reward.
Set Financial Goals
Define short-term and long-term financial goals to stay motivated and focused on your financial journey. These goals can reflect your own interests and values, after all, personal finances is personal! Whether it’s saving for a down payment on a house, further education, or starting your own business, having clear goals will help you prioritize your spending and savings efforts.
Seek Wise Counsel
Proverbs 15:22 says, “Plans fail for lack of counsel, but with many advisers they succeed.” As you’ll discover we live in a fast-paces complex world. You will encounter both challenges and opportunities where you won’t be sure how to respond. Seek a handful of wise and trustworthy counselors who are knowledgeable and care about you. People like your parents, pastor, or Christian professionals that you know can help you navigate and think through good and bad situations that will inevitably occur.
As you embark on this exciting new chapter, remember that building a solid financial foundation takes time and discipline. Set yourself up for long-term success and financial stability by learning and implementing wise money habits. Congratulations again and may the Lord bless you as you start your new adventure!