Graduating from college is a major achievement and one that you can be proud of. It is common knowledge that college graduates out-earn people with lower educational accomplishments. According to information from the Federal Reserve Bank of San Francisco, the 'average college graduate earns over $800,000 more than the average high school graduate by retirement age.'
Despite this earnings advantage, graduates need to consider a couple of things that hugely matter when it comes to reaching their financial goals after college and these issues deserve the proper attention.
Though you might be confident with your long-term earnings prospects, especially if you have graduated from a reputable college or have chosen high-paying majors such as law, economics, or medicine, it is important to set the foundation for wealth creation as soon as you are starting to earn money.
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If you follow these three key principles for college graduates as to how to handle your finances, you should be able to set the foundation for your financial success in no time:
1. Your finances are a TOP priority
If you landed a job just around the time you left college, congratulations. You certainly are on the right track.
However, it is easy to get carried away as you enjoy your first couple of well-deserved paychecks. The availability of some decent, regular cash is likely to be a new experience and probably will be in stark contrast to the kind of money you could access while still in college.
Many students manage college on a tight budget and even take out significant amounts of student loans to finance their education.
Though you certainly deserve enjoyment after many years of hard work at college (and many more in the corporate world), make sure you stay on top of your financial situation and start to pay down your student loan debt as soon as possible. The sooner you start to repay, the less interest accrues and the better off you are going to be.
It might take many years to get out of debt and the task may seem insurmountable at times, but you have got to start. The more money you can put toward paying down your student debt, the sooner it will disappear and set you free.
2. Choose your career wisely
Many commencement and graduation speeches give students and graduates valuable information about the principles of life and how to attain success.
Unfortunately, many graduates appear to be more concerned with chasing a career that simply pays the most and offers the best perks and advantages. Do not fall for that. Is it really that much better to be rich and unhappy than to be poor and happy?
Chose a career in a field that you are genuinely interested in and that is your passion. If you do what you love and care enough, the money will follow.
3. Budgeting
Probably one of the most important rules for managing money relates to budgeting. If you keep rigorous track of your income and expenditures you will see yourself and your finances in much clearer light.
Set up an Excel spreadsheet in which you track your monthly cash in- and outflows and determine at the beginning of the month how much you are planning to spend on various items. You will quickly see on what items you are spending too much money and where you can save extra money that might be better applied paying down debt.
A stringent budgeting approach can help you tremendously in controlling your finances and can put your student loan debt in proper perspective.
The Foolish Bottom Line
Graduation is clearly a moment for celebration and, like many other students, you have likely sacrificed a lot during your college time. This makes is so much easier to just take your paychecks and flush them away.
But setting the foundation for financial success is as easy as it is straightforward: Have a tight grip on your finances, control your spending and put as much money as you can toward paying down debt.
