All those long days and late nights of studying have finally paid off. Graduation day has finally arrived! You’ve been imagining this day for a while now and it’s finally here. No more group projects, study sessions, papers to write or final exams. You are now an adult ready to take on the world. But what does that mean exactly?!?!?
Well for sure it means landing your first position (if you haven’t already). And all the other things that come with being an adult such as finding a place to call home and deciding what future life you want. With all the things that adulthood brings, the most important is properly managing your finances. This may be your first real glimpse into what it takes to run your own household and be responsible for making financial decisions. (Hopefully though, you’ve had some experiences that will make this transition a little easier.) While you may have been able to wing certain things while you were in college, winging it with your finances IS NOT ideal. Having a realistic plan in place is critical for minimizing the financial bumps in the road the first few years of adulthood. I was totally winging it when it came to my finances my first few years and let’s just say the road was bumpy. I had a lot going on though, I was expecting. As you can imagine not many people were looking to hire someone who would need to take maternity leave within the first few months of being employed. (That’s a story for another day.) Thinking back, if I had a few basic strategies in place I could’ve minimized some of the financial bumps along the way.
After landing your first position, the first thing that every college graduate needs to do is to identify your financial obligations and goals. This is a crucial starting point as you have to know where you are and where you are trying to go before doing anything else. Identifying your financial obligations includes coming to terms with any debt that you have accumulated on your college journey. (If you think you are alone here, you’re not.) This debt may include student loans, credit card or car loans. Identifying doesn’t just mean taking a look at statements or websites to see how much it is, it means writing it down so that you can see it in black and white. As I mentioned earlier winging it with finances is NOT ideal. Knowing your exact starting point will help when its time to create your financial plan. Other financial obligations that need to be considered are monthly rent and all costs associated (electric, heat, water, renters insurance, etc.). You will also have to consider your transportation costs- car, car insurance or public transportation expenses. Once you’ve identified all of your financial obligations, it’s now time to identify your goals. Your goals should include your plans for the future and may include things such as paying off student loans, saving to purchase a home or saving for retirement. (Yes I did say retirement, starting NOW is key to living the life you want later.)
Now that you have the basis for how much money you will need. It’s time to calculate how much you will need to bring home to meet your obligations. One of the things I find is that people say “I will be able to handle my financial obligations because I’m going to be making $50,000 a year”, quick math on 12 months says that equates to about $4,200 a month. $4,200 each month though, is NOT what you will be bringing home. There are taxes, health insurance, 401k plans(yes I am still talking retirement planning) etc that will be deducted BEFORE you even get your check. So that $4,200 now becomes less. There are several online calculators available that can help you estimate what your bring home pay will actually be such as, Calculator.net and Paycheckcity.com. Keep in mind these are just estimates and may vary from your actual bring home pay.
After the shock has worn off of what you make and what you will actually bring home, its time to create your financial plan. Think of your financial plan as simply all of your financial goals and how you are going to achieve them. Example if one of your goals is to pay off your credit card debt, you will have to determine how much you have to pay each month to achieve that goal. Just getting started, I suggest mapping out a 5 year plan. This helps you to identify the actions you will need to take keep you on track to accomplish your 5 year plan. Keep in mind plans can change and often do and that is ok but having a general sketch of the next 5 years is important.
In addition to mapping out your 5 year plan you will need to create the blueprint that will help guide you. Your blueprint is simply your budget. Your budget will help you assign a job for every dollar that comes in so that there are no leaks or misguided funds. Without a budget, money tends to disappear without you really knowing where it went. When creating your budget you will have to also set up a way to track your expenses so that you can make sure you are staying within budget.
These are just a few of the things needed to get started with your financial journey. To assist even further, check out the FREE Financial Resource Library
Looking for a more personalized approach to starting your financial journey? Register for the College Graduate Money System
Congratulations on your academic accomplishment and Happy Adulting!