Graduation season is officially upon us. For many graduates, this exciting time is tempered by a bit of reality. Entering the real world is a scary proposition. With sky-high student debt, potentially low starting salaries, and the challenges of learning how to manage finances as an adult, entering the real world can be a daunting prospect. It may even be harder than mastering college!
In fact, the numbers are a bit grim for 2017 college graduates. The national student debt toll is at an all-time high, at 1.41 trillion dollars and climbing. Rates of home ownership are decreasing, and many young adults are putting off getting married and starting families due to this heavy burden of student loan debt.
It can be hard to keep a positive outlook given these statistics. Yet there is hope for recent college grads, particularly those who are dedicated to paying down their debt and getting their finances in order as they start their first jobs out of college.
Tips For Getting Your Finances In Order
Setting Up A Budget
Learning to handle your money once you are working can be incredibly difficult, particularly if you never worked full-time before. The first step that you should take is to establish a budget. Doing this can help you gain control of the money you have coming in and going out and can help make sure that you can beat the odds and pay off your student loan debt quickly.
If you’ve never set up a budget before, here are the basics. A budget is about setting priorities for how you will spend your money.
It starts with the amount of income you have each month. Given this amount of money, how will you allocate it? Determine how much you will put towards housing, food, utilities and other necessary expenses, such as transportation. Making choices like having a roommate, living in a less expensive area, taking the bus instead of buying a car or not having cable can help keep your budget trim, giving you more space in your budget to put towards your goals, such as savings, student loans or retirement.
Make Sure You Save
Your budget should also include some room for savings, as well as for entertainment. If you don’t set aside at least a little bit for fun, it will be hard to stay upbeat and to stay on track for your goals.
I am guilty of this. When I set up my first budget, I was putting everything I made towards my student loans and to savings. I set aside $25 a month for entertainment. The first month was easy. I was excited to work on my goals. But by month 2 I started to resent that I couldn’t afford to hang out with my friends. By month 3, I revolted.
The lesson here is to allow yourself some fun in life.
Keep in mind that having a good time doesn’t have to be expensive. You can get some appetizers and drinks at happy hour instead of going out for a multi course meal, spending far less money and having just as good of a time in the process.
And Pay Off Debt
If possible, one of the goals of your budget should be to put extra money each month towards your student loans. Any additional cash that you can spare can really help to make a huge dent in the total amount that you will pay on your student loans and can take thousands of dollars and years off of your student loans.
Knowing that an extra $100 a month will mean that you are done with your student loans several years earlier can help you maintain a much more positive outlook as a recent college graduate.
Of course, if you have student loans you have to make sure you understand them and how to manage them. Take the time to learn what kind of loans you have (federal or private), what their interest rates are, and what your options for repayment are.
If you are struggling to make your monthly payments, you may be able to explore different payment plans, especially if you have federal student loans. You may also be able to consolidate your federal student loans or refinance your private student loans.
Consolidating your federal loans with a federal consolidation loan won’t save you money, but it can help you by simplifying your monthly payments. Refinancing private and federal student loans will typically reduce your monthly payment, so it may be a great option if you are eligible for this type of loan.
Learn as much as you can about your loans, including what company is servicing your loans and how much you owe, so that you can take control of your student loan debt and pursue a strategy for repaying them that works for you.
Graduating from college with student loan debt can be overwhelming but you can conquer your debt and move forward to meet your financial goals as long as you put together a solid game plan. Just know that it will take time but if you stick with it and keep a positive outlook, you can get rid of your debt and be on the path to financial freedom.