With tuition costs continuing to rise, student loan debt has reached higher averages, leaving many feeling financially disadvantaged before their careers even begin.
A 2024 survey conducted by Earnest, a financial planning company focused on students, revealed that many graduates from the Class of 2024 feel unprepared to manage the financial demands after college.
The survey also highlighted that most are postponing major life milestones due to debt, struggling with budgeting and loan repayment, and that 16% of respondents stated they would have reconsidered attending college if they had known the extent of their future debt. Experts point out that starting salaries in certain professions often fail to keep up with the growing cost of living, further exposing graduates to financial instability.
Budgeting and Banking
Once you let go of your graduation stoles and sashes, the move from being a student to starting full-time work begins. At this point, it's good to reassess your bank account type. Do some online research or visit your bank to explore which account options best suit your current needs.
Managing your bank accounts responsibly is a key step in building a strong credit history, so it’s worth prioritizing this and organizing your financial setup. Many banks offer highly functional apps that make it easy to track, manage, and budget your finances all in one place. Make the most of these tools to simplify your money management. Regardless of your chosen tools, develop the habit of regularly tracking your spending, managing your cash flow, and keeping your expenses within your income limits.
Remember, the amount you earn is less important than how much you save and invest, and this is where your focus should shift as you grow financially.
Invest in Retirement Funds
It is tempting to keep retirement contributions low when managing expenses early in your career. However, invest as much as you can into a retirement account like a 401(k), 403(b), or IRA.
Starting early greatly benefits these savings, allowing time to grow your investments. Focus on thinking in percentages rather than dollar amounts. Many employers offer matching contributions, so try to contribute at least enough to take full advantage of this match, it’s essentially free money.
You should also enable auto-escalation features, which increase your contributions by 1% each year. Over time, this gradual increase could add up significantly, contributing an extra 6% to 9% to your retirement fund after six to nine years. Look at how much you can allocate from each dollar you earn, and prioritize a long-term mindset. Use these contributions to put your money to work and build your financial future.
Create a Savings Strategy
Think of saving as a way of paying yourself first, whether it’s for your future self, your vacation self, or yourself when unexpected emergencies arise. You can build a financial safety net by integrating savings into your budget and regularly setting aside a portion of your income.
To make this approach more effective, consider dividing your savings into short-term and long-term goals. Short-term savings can help you plan for things like vacations or create an emergency fund to safeguard against job loss, medical expenses, or other sudden costs.
Endnote
For recent graduates, stepping into the real world and managing new financial obligations can be daunting. You might wonder how much to allocate for rent or how to wisely invest your savings, often feeling uncertain about where to seek guidance. Embrace the challenge and put in the effort.
