I will never forget the period of time immediately following my college graduation, finally entering my long-anticipated post-graduate life. Those first two months contained more life events than I ever thought possible: I graduated from college, moved into my new apartment, got engaged, started my first job, and complete financial independence from my parents. In that short amount of time, I was astounded by how different life was and the things I had to learn very quickly to adapt. Below are the most important things I learned in those first few weeks. If you are a recent graduate, I recommend that you follow these steps as soon as possible!
1. Prepare an annual budget.
In college it’s possible to survive by hardly doing any financial planning at all. Unless you’re one of the amazing people who supports themselves through college, you can typically rely on your parents to get you out of a financial jam. That is no longer the case once you go off on your own! It’s very important that you understand and take control of your money, and the best way to do that is to set a monthly budget. If you are a recent graduate and have yet to take this step, I recommend that you join our budget challenge and get a free copy of our Microsoft Excel Budget Template. A good rule of thumb I like to use is to write monthly budgets from now until the end of the year. This will also help you put aside money for unexpected expenses, which brings me to my next point….
2. Learn how to save!
Did you know that most Americans can’t afford to spend a thousand dollars in the event of an emergency? Are you one of those people? If you are, you need to correct that as soon as you can. The sad reality is that things happen all of the time that are beyond our control, and most of the time those things come with a financial cost. Examples of unexpected costs that I experienced during my first year post-college were medical bills, car repairs and unexpected jumps in utility bills. At the same time, we all have goals that we want to accomplish in the short to medium-term. To prepare for uncertainty, as well as reach those goals, it is imperative that you learn how to save your money. If you’ve graduated from college and don’t yet have a savings account, open one immediately and start putting money into it on a regular basis. It doesn’t have to be a lot, but it will still add up in the long run! Doing so will prepare you better for catastrophe, as well as help you in the future if you ever want to buy a new car, build a house, etc.
Additionally, you should start thinking right now about where you want to be forty years from now. It’s a mathematical fact that the younger you are when you start saving for retirement, the better the chances that you will reach your retirement goals. You should take advantage of this by contributing to a Roth IRA or 401k (or both!) and invest aggressively! This tactic may not be the smartest move in ten or twenty years, but you’ll never be more free to accept risk than you are right now! This is your chance to get some high yielding returns early on.
3. Insure! Insure! Insure!
I promise you I’m not saying this just because I work in the insurance industry. Like I said before, sometimes terrible and unpredictable things happen that can throw you into a financial hole. Fortunately, purchasing an insurance policy transfers much of that risk away from yourself. By now you should already have an auto insurance policy. This protects you from extreme financial liability in the event of an accident. Most young adults won’t need any more than that before graduation. However, now that you’re off on your own you should be thinking about getting better protection for yourself and the assets you will soon be accumulating. Since you will likely be renting your first new home after college, the best way to do that is by purchasing a renter’s policy.
Did you know that if you are renting a home or apartment, you have no insurance protection regardless of whether or not the owner has the property insured? If you are robbed or the place burns down with all of your stuff inside, your landlord/lady will be the only one who collects on the homeowner’s policy and you won’t be reimbursed for a single dime of your lost possessions. Getting a renter’s insurance policy protects your personal property, and is typically not very expensive. In other words, you get peace of mind knowing that your things are protected, and it will cost you very little. Many landlords now require you to have renters insurance as part of the terms of your lease, but even if they do not you should still take the necessary steps to protect yourself from the unexpected.
4. Purchase a file organizer and shredder.
You are soon going to be buried in paperwork ranging from bank documents to benefits forms to credit card offers. It is very important that you track all of your important papers responsibility. The way to do this is to purchase either a file cabinet or small portable file carrier, and use it to categorize your forms for easy access. Believe me, staying organized is going to be very important. This is especially true for tax documents, medical forms and insurance paperwork.
The next thing you buy should be a shredder. That way you can responsibility dispose of the documents you don’t need while protecting your private information. The moment you start building credit and become financially independent, you’re going to get a flood of mail in the form of credit card and insurance offers. Sometimes these forms may already include your name and a pre-approved account number. You don’t want to dispose of these forms in the garbage, because this may make you vulnerable to identity theft if somebody fills out the form in your name. Whenever you get something like this, or any financial offer or form that you aren’t going to keep, make sure you dispose of it properly by shredding it.
If you recently graduated from college, I recommend that you follow these four steps as soon as you can. Doing these things set me up for success as I entered my new life as an independent adult, and made the transition into married life all the more easier!