Money Tips for Recent Graduates

Congratulations! You’re done with school forever and the world is your oyster. You can do anything you want. Well, almost anything. If you’re like most of us, you’ve got a hefty amount of money to pay back first.  For recent graduates, money management quickly becomes a very important skill. Here are a couple of money tips to keep you in the black. 

Keep Your Credit Cards in Check!

One credit card can be useful and helpful, and two could have their uses, but any more than that and you’ll likely end up in trouble. Credit card companies bank on you not being able to pay your card balance each month. They add around 20% of interest each month. Before you know it, you’re facing even more debt and you could be hurting your credit score too. 

With credit cards, people have a tendency to spend more than they can afford because credit cards feel like free money. While they have their uses, the less you can use credit cards, the better.

Speaking of Student Loans

When it comes to student loans, some suggest that trying to tackle it immediately doesn’t make sense. You’re better off putting your money in high-yield savings. Most schools or government-assisted loan programs allow you to defer your payments for a while; most of them also have low interest rates. The best thing you can do is ensure you know as much as you can about your loan, when it’s due and how much it is.

Start Your Savings

With student debt hanging over you, it may seem like strange advice to tell you to start saving money, but a savings fund is essential for when things don’t go according to plan. Think of it as a rainy day fund. If your car needs some work you weren’t expecting, or you need to take a trip out of the blue, a savings fund allows you to access that money without putting more strain on your credit card.

Have a Budget

Having and keeping to a budget can feel like a chore, but it is by far the best way to keep on top of your finances.  Making sure you only spend what you can on a month by month basis will help you make all your payments, and it’ll set you up with great habits moving forward. 

Think Long Term

When you’re planning your budget and looking at the money you owe, start to map out a long term plan for paying it off. How long will it take to pay off your student loan if you pay $50 a month? $100? How much can you afford and how long are you willing to work with your debt. Thinking long term will help you know what you financial outlook looks like. 

Now that you’re striking out on your own, don’t let poor money management get you in hot water. Don’t hang on to too many credit cards, and remember to pay your student loans. 

Time to Pay Back Student Debt?

Time to Pay Back Student Debt?

My son Matt just finished his master’s degree in education. Last week we got the diploma in the mail. Today we got the letter from student loans detailing his payback schedule – including interest accrued before the repayment date event starts!

 

According to an article about student loan debt from Forbes, student loan debt in 2019 is the highest ever. “There are 44 million borrowers who collectively owe 1.5 trillion in student loan debt.” It’s so rampant that student loans make up the second highest debt category – right behind mortgages!

 

Debt across the ages

The student loan epidemic isn’t only a problem for people just out of school. It wouldn’t surprise anyone to hear people in their thirties are still carrying student loan debt, but according to the above Forbes article, the largest increase in student loan debt comes from people in their sixties.

 

Depending on whether the student has a private loan or a federal one the interest rate will vary. My son has a federal loan so his interest rate is about 6%. His loan is for $7, 220. Luckily, it’s not huge. If he does nothing but follow the payment schedule provided by the loan office he will pay just over $80 a month for 114 months to pay it back. At that rate he will end up paying a total of $9,489 – an extra $2,269 in interest. Almost an extra third!

 

Obviously the higher the loan, the higher the accrued interest -but none of us is doomed to be a statistic.

 

Pay bi-weekly

Whether you have a student loan or some other outstanding debt, a painless way to make an extra payment a year is to pay your loan twice a month instead of once. We’re not saying to pay more (although yes, we do want you to pay more – but more on that later), what we are saying is to divide your payment in half and pay it every two weeks instead of once a month. As I said, Matt is supposed to pay $80 a month. If instead of doing that, he pays $40 every two weeks then over the course of a year he will have made 13 months of payments rather than 12!

 

Get high interest loans out of the way

If student loans are not your only debt, you need to prioritize yourself. Figure out which debt is costing you the most in interest every month. Make the minimum payments on everything then clear through the one that’s costing you the most first. Once you’re finished with that move on to the next one.

 

Review your budget

The payment amount set by the loan office for Matt is $80, but of course the more Matt pays the faster he dispatches the loan and the less interest he pays as he goes and overall. Matt’s first priority is to assess his budget. He needs to figure out much extra he can put towards that loan on a monthly basis and where that money will come from.  That might mean taking his lunch to work more often or riding his bike instead of taking public transit. It might mean he decides to move back in with me for a while to put that rent money toward the loan.

 

Student loan repayment benefits

To help deal with the overwhelming problem of student debt, many companies offer student debt payment assistance as part of their benefits package. Some will simply put money toward your debt on a regular basis, others will match payments made by the employee. Here are a few examples. A little research will help you track down more!