Financial literacy is an essential part of future success in life. Unfortunately, the education of young people does not include enough such lessons. But it is in the interests of everyone to engage in self-education in this sphere. It will help you to increase your level of knowledge about finance.
Here are some tips that will save and multiply the budget of recent graduates:
No. 1. — Plan your budget
Planning continues to be the guiding principle for personal financial management. This rule applies even to the level of the state. It allows us to speak about the individual.
Your budget is your area of personal responsibility.
Learn about saving
Recent grads usually are not in the financially secure category. Because of this, the basic rule for you is to save money. Basic needs should be handled first because of student loans and the lack of high-paying jobs or other permanent income sources. Such needs are accommodation, food, clothing, and health.
Pareto principle 80/20
A world-famous rule will explain to you how to save. You may be surprised that this principle works even in matters of budget. So, people can live without 80% of the things they buy. And only 20% of the items are able to satisfy your life needs. When choosing a product, you should consider whether you need it.
Rule 50/20/30
Another useful rule. Only 50% of your budget is better to pay on priorities. Twenty percent should be saved and multiplied. It means you should not spend this amount. It is required for investment or maintenance in the reserve fund. Grads can put this money aside for retirement.
The remaining 30% is the amount you can spend on paying off debts, buying luxury items, traveling, etc.
Create a repayment plan
If, after studying, you have an outstanding student loan, you need to pre-allocate your budget. After graduation, there may be a grace period when you are not obliged to make credit payments.
But you should use this period to reload your financial reserves. Do not delay payment of the loan, as it will eventually increase the payment amount. You may not have no enough money to pay your debts.
First, pay the loans with the highest interest rate and use deferred payment options or choose a different repayment plan. Second, look for new sources of income.
No. 2 — Create a business plan
Money runs out quickly. Do not expect your reserves to last long. Use them. The situation in the market is changing rapidly, and you need to be able to adapt to it.
Forget about doubts
It is the purpose of your education. Being an employee cannot bring you the desired income. Your niche in the market will not wait long. The best chance is to become a business owner or independent contractor.
The investment is essential
Invest in yourself first. Analyze the market and your abilities. Use your university-acquired knowledge. Find a product or service that you can sell. Make a financial plan based on your budget. Analyze the possible risks and expected results. You will succeed.
Where will you be in five years?
When choosing a niche, focus on your desires. Who do you want to see yourself through time after five years? It is what will bring you the most profit.
No. 3 — Conditions for financial stability
Your goal is to stand on your own two feet. The money you have should always be under control. It is the only way to avoid unnecessary expenses. There are several rules for it.
Keep accurate records
Keep all your payment receipts and bank card invoices about your income and expenses. Count your high costs. Help yourself see the sources of income and the categories of goods that require the most money.
The role of real paystubs
Perhaps the first thing you will face is the issues of renting an apartment, buying a car, or other expensive things that you will need for life. In this case, real paystubs will have a unique role to play.
This document displays all revenues, expenses, and tax deductions for a specific period. So it is also an excellent tool to control your funds.
Keep a good credit history
You may need to obtain and use a credit card in the future. Choose the best banking conditions and a reasonable interest rate. Maintain your credit rating to use credit facilities in the future. The most important rating is the FICO score.
It fully displays the risks of working with you on credit cards, car loans, and housing mortgages.
Use insurance options
Insurance is an excellent way for you and your dependents to cover the risks of loss of property, life, or health. Moreover, life and health insurance for fresh graduates will cost much less than for people of older age.
No. 4 — Use reliable sources of financial literacy
The Internet has made an enormous amount of information available. However, it is worth giving in to doubts about the information obtained from no authoritative sources concerning finance.
CFA, CPA, RIA
Naturally, persons who have the appropriate education and work experience will be able to provide much more professional assistance:
- Certified financial advisors
- Certified public accountants
- Registered investment advisors
They also will be able to systematize your income, reduce costs and optimize tax payments. But their services are expensive.
Podcasts, books, entrepreneur mindset blogs, books on personal finances
Such publicly available sources of knowledge can help in financial development. But you need to filter the information that you get from it actively. Choose sources associated with reputable people in business and finance only.
Entrepreneur mindset blogs are an excellent addition to actual communication with small businesses. Such blogs raise self-esteem and inspire. They also contribute to the rapid creation and easy promotion of your business. You can always find advice and support for beginner business owners in such blogs.
Note that the list of advice given here is not exhaustive. Optimizing your finances should be a significant matter for fresh graduates.
So go on.
Vladyslav Kushneryk is Chief Marketing Officer for Paystub Now, an online resource for individuals seeking simple and quick documentation covering many services. He has more than 10 years of experience in business development, finance, marketing and sales.
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