It’s graduation time; with a sigh of relief, years of hard work have finally come to an end. Graduates are now on the path to adulthood and even more daunting than that – financial independence. After years of university fees and student loans, many graduates find themselves a world away from even getting close to the latter, with nearly 60% of parents still providing financial support for their adult children in the years after finishing university. However, with a desire to save and a savviness when spending; securing financial independence soon after graduating is certainly possible. Below is a compilation of the most important tips to help you on your way.
Budget like a pro’
Within a couple of months of working, you will begin to gain an understanding of how much of your paycheck you can afford to spend each month. It is fundamental to formalize this by creating a budget planner. There are tools available online that can be used to repair your credit and build your own personal budget planner, or you can put one together yourself in the format of an excel spreadsheet. Your budget planner should document and prioritize all of your monthly expenses, with essentials such as rent, savings, student loan payments, and food listed first – followed by more carefree spending on personal interests, travel, and clothing. Having a visual representation of your monthly finances will encourage you to live within your means, eliminate frivolous spending and be realistic about how often you can afford to treat yourself.
Overstay your welcome
If your parents are happy to let you stay at the family home rent-free then this is definitely the most financially-savvy living option. With no housing costs, you will be able to devote your paycheck to increasing your savings and reducing your debt. Further to this, the money that you would have been spending on rent can be saved towards your first flat or house deposit.
Embrace the credit card
It seems that Gen Y maintains the misconception that using a credit card will result in a mass level of debt. Although debt can rack up if quickly if credit is not managed well, it should be emphasized that using a credit card responsibly is one of the easiest and most reliable ways to build a strong credit history which can secure your financial backing in the future. Establishing a formidable credit rating at this stage in your life will strengthen your chances of being approved for a mortgage or a loan in the not-so-distant future.
Using a credit card need not be a daunting prospect – by using credit for only small purchases and continuing to clear the balance on time, you are able to avoid interest charges whilst establishing a strong credit history of responsible borrowing. Further to this, some credit cards offer an initial interest-free period lasting a year or longer, further eliminating the risk of accumulating debt.
Educate yourself
Financial illiteracy seems to hamper most of Generation Y, with a high percentage of recent graduates lacking both the knowledge and confidence to make informed decisions about their finances. It is imperative for graduates to be proactive in improving this through utilizing the mass of knowledge and advice that is available at their very fingertips. Books, journals, apps, blogs – there is a host of resources offering financial advice, and many are written specifically with young adults and recent graduates in mind.
Treat yourself by saving
Although it is important to save for the serious stuff, I am a strong advocate of also enjoying your hard-earned riches. I would advise putting a monthly sum of money towards a personal aspiration, such as a traveling fund or dream-car fund. This way, you can enjoy your earnings whilst learning the principles of saving.