With upcoming graduations, nonprofit, American Consumer Credit Counseling (ACCC) has put together five important personal finance tips for new graduates.
The truth is not every college graduate knows much about their personal finances, and that’s why ACCC has created its 2016 personal finance tips.
“With graduation comes new expenses and added stress, particularly as it relates to finding a job and paying those first student loan bills,” said Steve Trumble, President and CEO of American Consumer Credit Counseling.
“Unfortunately, many graduates lack important financial literacy skills and do not realize that the way they spend their money now can have a major impact on their financial lives far into the future.”
Currently there is about $1.2 trillion in outstanding student loan debt in the U.S, according to research by MarketWatch. According to a study by lendedu, 7 out of 10 graduates are graduating college with student loans. At this time, students with loans are graduating with an average just under $30,000 in debt. Of the respondents, 92.8 percent do not know the difference between subsidized loans and unsubsidized loans.
Here are ACCC’s five essential personal financial tips to incorporate into grads’ daily personal finance habits:
1. Create a budget and stick to it – Now that you are making money and receiving a paycheck it is tempting to want to treat yourself. It is important to understand what a budget is and how you can balance your income and monthly expenses. Develop a strong budget by using a budgeting worksheet to determine where your paycheck is going each month and where you may be able to cut back and save.
2. Don’t forget the debt you already have – It is important to start paying down student debt as soon as possible. Although it may seem tempting to pay the minimum or defer your loans, it can lead to greater financial challenges down the road. Student loans are one of the best ways to establish and build good credit. Do your homework and make sure you are aware of the different repayment options that are available to you.
3. Protect your credit worthiness – A credit score allows lenders to measure your ability to repay debt, which can determine the interest rates you pay for your car, rent, credit cards and mortgage. Paying the full balance of your credit card on time each month can help you build strong credit and in turn save you thousands in interest payments.
4. Establish an emergency fund – Although putting money aside for an emergency fund may be unrealistic for recent college graduates, putting as much as $5 aside each week can add up should something unexpected occur, such as job loss or a medical bill. Once you establish yourself and start making more money, start setting aside 10 to 15 percent of each paycheck.
5. Start saving for retirement – Putting off saving for retirement is one of the most common mistakes recent graduates can make. An employee-sponsored 401(k) enables you to purchase bonds, stocks and mutual funds with pre-tax dollars. This money can grow for years without you having to pay taxes. By not investing in a 401(k) plan you are essentially turning down free money.
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