Smart financial planning post college
Students looking forward to their graduation day hope for a future with a secured job and a new life full of choices and responsibilities which they must take on. Some take it up as an exciting challenge while others figure it to be a daunting task they might not be ready for. One of the biggest issues plaguing fresh graduates these days is the problem of student loan debt.
The current job market is not very lucrative and given the recent economic problems troubling the country, it is getting harder and harder by the day for fresh graduates to meet their financial responsibilities effectively. Post your graduation from a 4 year college, a little bit of financial planning will set your future stability.
Build a budget
Like most other websites and self help books, there cannot be enough stress laid down on the fact that you need to create a budget for yourself before you make a move. It might be a pretty boring job to sit down and make a budget for yourself and you can just as well skip the whole process, but its just another shortcut to a financial disaster where you are left without a single penny in your account at the end of the month.
What most people fail to figure is that they are only left with a fraction of their income in hand after taxes, social security and 401(k) contribution have been taken out of their paycheck. Budgeting lets you keep all such deductions in perspective so that you know exactly how much you can afford to spend.
Review your insurance
Your insurance costs would probably have been covered by your parents for the time you were in school but once you graduate, you are expected to pick up your own bill. Once you are out of school, your first step is to find out how much coverage you had. Lets take stock of the basic policies a fresh graduate should have: auto insurance, health insurance and renter’s insurance. The cost of coverage can be quit alarming to say the least and you will need to play smart to save money.
Your best option for getting cheap health coverage is through your employer. Group medical coverage is cheap and covers all the necessary angles. Since less and less number of employers are offering medical coverage these days, you should be open to getting yourself a very basic health insurance coverage to take care of the high medical costs you might face in an emergency. Medical bills can become a debt burden if you don’t have the health coverage to pay for it.
The cost of covering your vehicle would vary greatly depending upon the location you reside in, your age, your driving history and the kind of car you drive. You will need a good agent who can get you the most cost effective quotes and also get you all the discounts you are eligible for. It’s going to bring your costs down drastically.
Assuming that you will be staying in a rented place after you have graduated and started working, you will need to have renters insurance to cover your personal belongings and general liability. If you have an agent, it will be pretty easy to acquire all the coverage that you need for a good price. If you wish to purchase insurance yourself, you will need to do a lot of research and shopping before you find the best product at a perfect price.
Start saving at the onset
Most newly employed graduates make the very simple yet highly damaging mistake of waiting to save money till they have little to spare. Right after coming out of college, expenses are still relatively low. You don’t have to make payments on a house or a car and you definitely don’t have to support a wife and children. Payment against student loans can be deferred up to a period of 9 months as well, depending on the kind of loan you took out.
You need to understand that compound interest is a very powerful financial tool. The earlier you take advantage of it. A simple calculation will illustrate the fact that if you save $10 every day from the age of 25 till you are 65; you will have more than $1 million. All this is simply from assuming a yearly 8 percent compound interest rate.If your employer offers you a 401(k) pan, take full advantage of it. The earlier you save, the more you will have stored away for a rainy day or for when you retire. The good thing about saving through a 401(k) plan is that the contribution is deducted at the source and in most cases your employer will match your contribution (after you have spent a few years with the company) towards your 401(k). Even if you don’t want to invest and save through a 401(k), there are still more lucrative options like the Roth IRA.
The real trick behind playing you cards right and staying out of debt after college is to understand and constantly reevaluate you personal finances. Tuning your insurance costs, setting up a budget and saving as much of your income as possible are nothing more than the underlying basics of successfully managing your financial future.