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5 Basic Budget Tips for College Graduates

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Two women in graduation gowns

Congratulations to the class of 2023! You’ve tossed your cap and collected that diploma, so now what? Life after graduation may look very different, but it’s a crucial time to start budgeting for both your present and your future. What’s the best way to do that?

Here are the basics:

1. Build a budget you can stick with.

Young adults who set an unmanageable budget for themselves run into financial trouble almost as quickly as those without a budget. If you overextend yourself, you may feel tempted to binge-spend or give up your budget entirely. If saving for the future is important for you, start with a 50/30/20 rule and adjust if necessary. With the 50/30/20 rule, you will allocate 50% of your budget to essentials (like rent, food, utilities, insurance, car payments, etc.). Twenty percent of your budget will be devoted to savings and investments (like a traditional savings account, money market account, or 401k). The last 30% of your budget can go toward nonessential expenses like entertainment, travel, shopping, and dining out. If those ratios don’t work for you (or you feel you can reasonably save more), tweak the numbers accordingly.

2. Build your credit score.

Having good credit is essential for everything from buying a car to securing housing. Since your credit history will follow you your whole life, it’s best to treat it with care. If you don’t have a credit card, consider getting one or becoming an authorized user on the account of someone you trust. Your FICO credit score is determined by five factors: Your payment history (35%), your credit utilization (30%), The length of your credit history (15%), the number of new accounts you have (10%), and the diversity of the credit accounts you have (10%).

3. Pay on time.

The #1 factor that will impact your credit history (both positively and negatively) is your payment history. If you have a credit card, personal loan, or car loan, set up automatic billing so you are never late and never miss a payment—and, if possible, pay off your balances in full. If you have a Maps account, make the payment process easier on yourself by using mobile banking to check your balances, manage payments, and transfer funds as needed.

4. Practice smart spending habits.

Credit utilization is the second most important factor that will impact your credit history. Your credit utilization rate is the amount of credit you have versus the amount of credit you are using. It is recommended that you keep your credit utilization rate under 30%. So, for example, if you have a credit limit of $10,000, you’d want to keep your balance due under $3,000.

5. Map out your student loan repayment plan.

Graduating with debt is common in the United States. As of 2022, there were 43.5 million Americans with federal student loans and the average public university student borrows just over $30,000 to obtain a bachelor’s degree. When you graduate, you won’t need to start paying that loan back immediately (most graduates are given a 6- or 9-month grace period), but you should start thinking about it. The grace period is intended to give you an opportunity to settle into your post-college life and strategize your repayment plan. During the grace period, stay in touch with your lender and let them know if you plan to move or change contact information. Be honest with your lender about your concerns and circumstances. If you run into issues with repayment, they may be able to offer you a restructured payment plan or even a temporary deferment or forbearance. If you ignore the loans (and your lender) your loan could be declared delinquent. A delinquent student loan could not only ruin your credit score but also trigger garnishments and a loss of eligibility for repayment plans and future student aid.

The Bottom Line

Navigating the real world can be tough—especially when it comes to managing a budget. The choices you make now will shape your financial future for years to come, but with a solid foundation, you can make headway toward the milestones you want to achieve later in life, whatever they may be.

The important thing to remember is that you don’t have to let your finances control you. Be mindful of the choices you make and don’t be afraid to do the work or ask questions. The more you understand your own money habits, the more you will be able to adapt to whatever comes your way.

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