If you will be graduating from college or study programs soon and planning to enter the workforce, this is a time where you will be experiencing a lot of changes in your personal finances. Firstly, there will be the increased income from your first job but this will be offset by the starting payments for your student loans as well as the temptation to buy first pay later with credit.
Credit Cards For New Graduates
Banks will be trying to get you to sign up for their cards and your mailbox will be filled with all sorts of pre-approved rewards credit card offers. If you are not sure whether you can resist the temptation of spending with easy credit, do not apply for a credit card. Instead, just get a MasterCard or Visa debit card which offers the same conveniences of cashless payments and it is just as widely accepted anywhere.
Do not misuse consumer credit because most people who carry credit card debts are young working adults. If you can start your career with a proper financial plan, it will pay off well with long term financial goals. If you save and invest, your money grows positively with compounding returns. On the other hand, if you increase your credit card balance, you end up accumulating debts and the high consumer interest rate will quickly grow your debts until they exceed your income. There are an increasing number of young adults filing for bankruptcy to discharge their credit card debts and bad credit personal loans because of poor money management.
Wealth Accumulation For New Graduates
Develop the good habits of saving and investing for major financial goals. Even though retirement is decades away in the future, starting early will help you optimize the way your money is used in investments to gain better returns and get better tax savings. For example, you can put a small portion of your income in retirement accounts with tax benefits while the remaining money is placed with short term investments to accumulate funds for buying a home or starting a small business etc. Doing so will help you retire early with sufficient money to enjoy an active lifestyle with no worries.
Unfortunately, most new graduates are not thinking about wealth accumulation strategies mentioned above. Instead, their main priority lies with buying a car with no credit history, expensive branded goods, exotic holidays to reward themselves etc. Hardly any of their earnings will be saved and invested; many will be accumulating credit card balances instead due to the easy availability of cash advances and credit lines.
If you can start saving for your future from the first paycheck and resist the allure of credit cards, you will be in much better standing compared to peers within a few years. Try saving at least 5 percent of your monthly paychecks and increase this to 10 percent and more once you get a pay raise. If you have problem saving money or even having to take out unsecured interest only loans for bad credit, track your spending and find where you can comfortably reduce unnecessary purchases.
Cheapest Way To Buy Life Insurance
The cheapest way to buy term, life or medical insurance is when you are still young and healthy. The monthly premiums for term insurance increases with your age, and chances of developing a health condition increase as you grow older. It is not easy to get accepted for life insurance or health insurance with pre-existing conditions. Usually, you will not be offered coverage or the premiums are increased greatly.
Accidents and unexpected illnesses can happen to anyone and at any age, so if you try to save money meant for insurance, it can work out to be extremely unfavorable to you. For new graduates with not much savings or financial assets, your ability to earn is actually your greatest asset so you should buy disability insurance coverage to protect against losing your income due to the occurrence of long term disability. When you have surplus budget, consider buying term and medical insurance to financially protect your loved ones and dependents if you have started a family. At the same time, you can look into making a will so that your assets can be quickly passed to your heirs without any lengthy probate process.
Invest In Further Education
Once you start working in a career you enjoy or intend to do for long term, you may realize how different the skills and knowledge taught in school are. Continuing education means investing in yourself and can help you advance faster in your career and earnings. Many new graduates are doing part time Masters in Business Administration and other post graduate courses to maintain their competitiveness in the job market.
A lot of financial decisions you make at the start of your career before 30 will significantly affect your success with personal money management. Develop good financial habits early on will benefit you for the rest of your life.