Congratulations Class of 2010! You’ve worked your butt off for over 15 years and now it’s time to put your skills to work and help out planet Earth. But one hiccup that prevents new grads from truly chasing their dreams is being behind on a bad money situation. You can’t go after the dream job or work the extra internship if you’re swimming in credit card debt or spending $800 a month at the bar.
Here are 5 things every college grad must do around graduation time.
Start Paying Off Credit Card Debt
Your greatest gift to your wallet will be starting to pay off any high-interest credit card debt you accumulated while in school. You’ll always be fighting an uphill battle with your finances if you carry a credit card balance every month.
With interest rates as high as 20%, paying your credit cards off will be the best return you’ll get on your money. If you’re 22 or 23 this should be your first financial priority when you graduate – don’t even look at investing if you’re carrying a balance with an interest rate over 10%.
Further reading: 10 Tips to Help You Reduce Your Credit Card Debt
Open a Roth IRA and Contribute Money for 2010
If you’re free of credit card debt, investing for retirement should be in your near future. Just out of college you have about 40-50 working years ahead of you to let your money grow. This means every year you make less than $105,000 you can put $5,000 in a Roth IRA.
If you do that for 45 years and get an 8% return on your investment, you’ll retire at 67 with $2.1 million in your Roth – and $1.9 million of that will have been return on investment because you started investing right out of college. The numbers don’t lie so open your Roth ASAP.
Further reading: Opening a Roth IRA for the First Time
Automatically Save a % of Every Paycheck
2010 grads are young and savvy. Make yourself money savvy and open an online savings account.
These accounts pay higher interest, have great web interfaces, and are absolutely free. Once you open an online savings account, link it to your checking account and set up an automatic transfer from your checking to savings to automatically save a % of every paycheck.
Start by saving 15% and over the next couple of months see if you can bump that up to 25%. These automatic transfers make saving money easy and before you know it you’ll have a huge chunk of cash in your savings account without even clicking a button.
Further reading: Save More Money: Automate and Separate Your Savings
Keep Your Expenses as Low as Possible
The month or two after graduation is hectic. Moving, new jobs, new life, no school, different friends, new setting. Your life is completely different than it was a month ago.
The best thing you can do for your wallet during this expensive time is keep your expenses low. You may have to buy a car, start paying rent, or buy some grown-up clothes for your new job. To cut costs move in with a roommate, go out to dinner once a week, and stop buying movies and music on iTunes.
The money will go fast with all of the start-up costs that accompany the first couple months out of college, but it’ll help you a lot if you keep some extra cash in your account by keeping your spending low.
Further reading: Are You Throwing Money Away? Unused Expenses and Untapped Discounts
Celebrate and Take a Breath
You’re done with school. Let that hit you for a second. If you’re going into the real world, the next year will be an interesting one so take some time to yourself and relax. Visit a friend you haven’t seen in a while, hit up the golf course, go to the beach, host a party.
Live your life.
It’s important to celebrate this transition to the next stage in your life and it’s important to take some time to yourself to reflect.
If you don’t have a job lined up, that’s ok. Live with your parents if you can and keep your expenses down. Take this time to really think about which direction you want your life to go. We often put this pressure on ourselves to continue down a path (I sure know I did) but this path isn’t real. No one loses points if they don’t transition from graduation on Saturday to a full-time job on Monday.
Life’s pretty interesting so grab control of your money at a young age so you can take advantage of the every opportunity that comes your way.
Photo by Beverly & Pack