Credit and finance tips for fresh college grads

Guest article Alayna Pehrson – Content Management Specialist at BestCompany.com

Graduating from college can be both exciting and terrifying. You go from living on student loans in a college dorm to figuring out how to pay off those loans while living in an expensive apartment. This type of change can be pretty overwhelming for any recent graduate.

So, how are you supposed to handle this intimidating financial situation? Simple. You take control.

Although it may feel impossible to get complete control of your finances, it’s all about getting organized and staying motivated. It is simple, but it also requires work and willpower on your end. Here are some organization tips for your finances.

1. Write down financial goals

It’s important to write down what your financial goals are before you start creating a budget. These financial goals will lay down the foundation for your entire budget. Your financial goals can be anything from paying off your student loans in a specific time frame to raising your credit score. Regardless of what your financial goals are, make sure they are realistic. You shouldn’t set goals that are unattainable. Revisit these goals frequently so you can stay in control of your financial situation.

2. Prioritize your finances

If you have student loans to pay off, you might want to make those your first priority after graduation. It sometimes takes years for people to pay off their student loans simply because they fail to make those repayments a financial priority. Instead of spending your paycheck from your new job on a new car, try putting that money towards your student loans and keeping your college car for a little longer. There are plenty of resources you can use to plan out paying off your student loans, so take advantage of those. You can also create your own student loan repayment plan, just make sure you can stick to it until your student loans are paid off. It’ll be worth it.

2. Create a filing system for paper documents

Although most documents are digitized, it’s still a good idea to create some form of filing system for the documents that aren’t digital. You also may want to store both digital and paper copies of important documents which is a good reason to have a secure and organized filing structure. If you have your social security card, birth certificate, tax forms, and passport, consider finding a secure place in your apartment or home to store those important documents.

3. Construct a realistic budget

Creating a realistic budget when you’re fresh out of college can be difficult. You may think you can live on just necessities, but you will come to realize the hard way that it’s nearly impossible to live on that type of budget. It’s okay to have some non-necessity spending money, but you just can’t go overboard. When you create a budget, make sure you can actually follow it. Start with figuring out how much you want to save each month and calculate what else you absolutely have to spend money on (necessities only). Then, see how much you can spare for non-necessity spending. Once you run out of your spending money each month, be strict with yourself and do NOT give yourself more money to spend.

Once you get your financial life organized, you need to maintain that organization in order to keep your newfound financial control. Here are some tips you can follow to make sure your finances don’t get out of control:

Be honest with yourself

If you aren’t following your budget or you have a problem using your credit card unwisely, the first thing you should do is admit it to yourself. Once you admit that you are struggling with your current financial situation, you will be able to realize that you need to change. You could revisit your budget to identify what you are struggling with and change it, you could get someone you trust to hold you accountable for your financial actions, or you could seek professional financial help. Whatever it is, make sure you are honest with yourself and change when needed. The longer you lie to yourself about your bad financial habits, the more out of control you will get.

Pay your bills right away or automate your bill payments

Establishing the habit of paying your bills on time can help you maintain a good credit score. According to myFICO, payment history makes up approximately 35 percent of your FICO credit score. So, if you want to maintain a decent credit score and stay in control of your finances, make sure you are in the habit of paying your bills on time. To help with this, you can either pay your bills the instant you get them or automate your bill payments online.

Regularly check your credit reports

In college, you probably didn’t worry about credit that much. However, after college, you realize that your credit score can determine where you live, what job you get, what loans you can get, and much more. Basically, credit is a big deal. To start your new financial lifestyle, get in the habit of regularly checking your credit report. According to the FTC, you are “entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies.” Since it’s free, you should definitely make sure you check your credit report and stay on top of your credit use.

Focus on living below your means

You may be tempted to spend money now that you are out of college and not forced to live on cheap instant meals. Unfortunately, giving into this temptation is something that could lead you to lose control of your finances. By focusing on living below your means, you will be able to save more money and stay in control. Don’t let your adult post-grad life take over your financial situation. You can still treat yourself but do so in moderation.

Alayna Pehrson