June 13, 2024
Categories: Checking & Savings Accounts, Credit & Debit, Education & Security, Financial Planning, Loans, Reaching My Summit
By Dawn Kellogg
You’ve just graduated from college. Congratulations! You are also embarking on a new chapter of your financial life. How you handle this next phase will determine your fiscal future in the long and short term. Here are three tools to add to your financial toolkit immediately.
A Budget
Making a budget doesn’t have to be complicated. Start by determining your take-home or after-tax income. Don’t forget to include any additional income you get from freelance work, parent contributions, etc. Spend a month tracking your expenses and subtract from your total income. A good rule of thumb is the 50/30/20 plan: 50% of income to needs, 30% of income to debt repayment and savings, and 20% of income for non-essential wants. Your budget will change and morph as your career and lifestyle develop, so consider this a working document.
Checking and Savings Accounts
Underneath your mattress or in the cookie jar are not good places to store your money. Set up checking and savings accounts as soon as possible. Do your research and find the financial institution that fits your lifestyle. Set up direct deposits as well if you are employed. Many financial institutions will waive fees if you have direct deposit.
Ways to Pay down Debt
It’s likely that you will have some form of debt (student loans, credit cards, etc.). Work to pay these off as they inhibit your ability to build savings and affect your credit score. There are two methods to pay off these debts: debt avalanche and debt snowball. The debt avalanche recommends you pay off the debt with the highest interest rate first. Once you’re done with that payment, move on to the next highest rate loan. The debt snowball method recommends you start with the smallest balance first. Once you pay that off, move to the next balance. You can also transfer higher interest rate balances to cards with lower interest rates to save money over time.
Welcome to the adult world. The next few years are instrumental in creating a financially secure future. This doesn’t mean that you can’t have fun, but do so within your means and on a budget.
The Summit Federal Credit Union, Elevating the ordinary™ since 1941.