Financial tips for new college grads

Carina Boucher | Citizens

The day is finally here — you’re about to enter the real world. Congratulations! You may have spent the last four years of college becoming literate in Shakespeare or SEO, but what about financial literacy? Creating good money habits now will help you for years to come, no matter where your life may take you. Read on for 6 financial tips that can help you get your financial footing as you enter your post-grad era.

1. Find your budgeting style

One of the most important things you can start doing is creating a budget. There’s nothing glamorous about counting pennies, but it can help you see how much money is coming in, what your expenses are, and where you can make improvements. Splitting drinks or rideshares with your friends can add up, and with digital wallets and money sending services like Zelle®, it’s easier than ever for money to vanish from your account. Wouldn’t it be nice if it was that easy to get money back in it?! This is where budgeting comes in to save the day.

Living within your means is important to take into consideration when you’re spending your hard-earned money. You may have heard of “loud budgeting,” which is basically speaking up and declining things that you really can’t afford — which is much easier said than done. But in a tough financial landscape, it’s necessary to be upfront about what you can (or can’t) afford. Patrick Milas, a senior financial planner at Citizens, echoed that in a recent US News and World report article. He said, “The emphasis on transparency and accountability in personal finance can lead to a more informed and empowered relationship with money. By openly discussing and strategizing around finances, individuals can demystify complex financial concepts and make more informed decisions.”

This advice pertains to anyone, whether you’re an adult getting your first job or someone who’s been in the workforce for a while. If you’re open and honest with your finances, your friends, co-workers, and peers will be, too. They’ll also understand when you must forgo something. There’s no shame in skipping the fancy restaurant and just grabbing takeout, or swiping your metro card instead of taking an Uber. These swaps will help you stay on track with your money and help you not stress about finances.

There are a few different budgeting strategies, so you can pick which one is best for you based on how much time and energy you want to put into it, as well as how much detail and control you want over your money.

• The 50/30/20 method is best for those who want to take control of their money, but don’t need to see exactly where it’s going. You’ll allot 50% of your income for needs, 30% for wants, and 20% for savings.
• The pay yourself first budget is best if you’re looking to increase your savings without investing too much time and effort into actually budgeting. For this, you’ll just set up automatic transfers to your savings every time your paycheck is deposited in your account. Even $50 a paycheck can give you an additional $1,300 a year if you’re paid bi-weekly!
• The zero-based method is best for serious budgeters who want to know where every dollar is going. Every month should zero out between the money coming in and the money going out.
• The envelope method is good for someone who wants a strong grasp on their money and how their dollars are spent, but also a little time consuming because you’ll be putting your money into various “envelopes.”

You’ll likely be taking on new expenses once you’ve finished school like rent, credit card payments and student loan payments. These are going to be super important to work into your budget, since you might not be used to making these payments.

If you can’t make the time or effort to put into budgeting, the 50/30/20 or pay yourself first method is probably best. If you have the extra time and want to see the details about where your money is going, try the zero-based or envelope method. You can run into obstacles in your budget due to emotional spending (hello, retail therapy), inconsistent tracking or unrealistic expectations — so if you need to, start with the least involved method and work up from there once you start feeling more comfortable.

2. Create a savings plan (and even pay yourself first!)

Saving can seem daunting, but splitting your savings goals into a short-term and long-term savings category can make it a little more manageable.

• A short-term savings goal is anything within a five-year window like vacations, an emergency fund, a new laptop or a designer bag.
• A long-term savings goal would be something that’s more than five years in the future like buying a home, a new car, or adding to your retirement savings. Retirement might seem far off, but you’ll be glad you started young. When you get older, it’s the last thing you’ll want to have to worry about!

Some financial goals you might have now that you’re fresh out of college might include:

• Becoming financially independent from your parents
• Paying down student debt or other bills like car payments or credit cards
• Saving for retirement so compound interest can add up over time
• Building a good credit score
• Contributing to an emergency fund for when unexpected expenses pop up

These goals can be achieved by having a solid financial strategy once you’ve started your post college career. Many financial institutions offer tools that can help you create a personalized savings plan by tracking your expenses and saving goals, like Citizens has the Citizens Saving Tracker™¹.

3. Start managing your student loans

The moment you’ve probably been dreading is finally here — you need to start thinking about paying back your student loans. Take a deep breath. You’ve got this! Now that the initial shock has (mostly) worn off, it’s important to start taking inventory. How much do you owe? What repayment options are available to you?

It also may be beneficial to see which of your loans are subsidized and which are unsubsidized. If you’re still within your six-month grace period, it may be best to start paying off your unsubsidized loans first since they’ve been accruing interest. Missing payments could adversely affect your credit score, so it’s important that you stay up-to-date with them.

4. Build and protect your credit score

Knowing (and checking) your credit score regularly is a smart savings habit. Building and maintaining your credit score is important for so many things like getting lower interest rates on loans, getting approved for credit cards, leasing an apartment, and more.

Although many credit card and banking apps show you your credit score at the click of the button, they aren’t always entirely accurate. The most accurate credit score comes from annualcreditreport.com. You can get a free copy of your credit report every 12 months, and you can see exactly what’s on your credit report and how it might be affecting your score.

5. Check out your banking options

You may already have a checking or savings account, but if you don’t, now is a great time to open them. Checking accounts are intended for everyday transactions like your coffee runs, gas station stops and paying bills. Savings accounts are for longer-term savings goals.

Most financial institutions offer different types of checking accounts, so you can prioritize exactly what you want in one. Think about things like maintaining a minimum monthly balance or paying a maintenance fee and weighing the different accounts offered against that. Some financial institutions might even offer additional perks if you have a checking and savings account with them.

When choosing your bank, make sure you look at the other products they offer in addition to just checking or savings accounts. You’ll want one that will grow with you — think home loans, credit cards, personal loans, and even saving and investment options, if that’s something you’re interested in. A lot of banks will also offer you loyalty discounts so the more you do with them, the more you’ll save. If you have a checking account with Citizens, for example, you could be be eligible for CitizensPlus™* benefits, which offers better deposit rates², credit card rewards³, lending discounts, and more.

6. Navigate your new benefits

If you were able to secure a job right after you graduated, you probably have a lot of benefits that you can take advantage of. These might include health insurance and paid time off. It’s important to take all of these into consideration, because every company will offer different options. Is unlimited paid time off important to you? Make sure you weigh the pros and cons of all the benefits offered by everywhere you’re offered a job, and check out reviews of the company on sites like Glassdoor to make sure they’re a stable, reliable employer.

Health insurance is something that varies from company to company, but if you’re under 26 you can typically still stay on your parent’s insurance as a dependent. If you’re not covered by their insurance, it’s important to read through the insurance options that are offered to you through your employer and pick the best one for you.

Making the most of this new chapter

Setting yourself up for financial success after graduation will help you make the most of this next chapter in your life, said Citizens’ Milas. “From the pressures of consumerism and environmental concerns to the realities of inflation, a challenging job market, and looming student loans, people are increasingly recognizing the importance of sound financial planning.”

If you’re ready to start the next step in your post-grad journey, head to our student checking page.