The recession has resulted in mass unemployment across America, and few demographic groups have had it as tough as recent college graduates. It can be hard to catch a break as a recent grad, with fewer companies looking to fill entry-level positions, and any vacancies available will be met with stiff competition.
What is worse, education loans like the loans that covered your law school tuition soon build up interest, and these debts would not begin to decrease until you find your first decent-paying job.
The last thing you want is to have to take desperate measures such as resorting to taking out a car title loan to pay off student loan debt or make rent. To prevent yourself from facing financial disaster, follow these 5 tips on how to handle your finances as a recent grad:
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Live With Your Parents
Moving back in with your parents after graduating from college may seem like defeating the point of going to college at all, but for many, it has become a necessity in this economy. There is no shame in seeking free rent while you attempt to take your first step on the career ladder.
Put Off Major Expenditures
Buying a new car or taking a lease on an apartment really is not the best of ideas when you have just graduated college and are unemployed. Any big expenditure that can be pushed back at least six months should be put on the back burner. Good things come to those who wait, so you will want to avoid big expenses as much as possible as your job search continues.
Do Odd Jobs
While you wait for your first big career break, do not forget that you can also make some money on the side as well. Ask your neighbors and friends if they need help with anything around the house, especially the lawn, and charge them the going rate. Odd jobs are often paid in cash, so you would not have to pay taxes on this income, and you may be able to keep yourself afloat for long enough to get your first big break.
Post-college budgeting
The true cost of living may surprise you; I know it did. Just keep in mind that every dollar matters and that you may save more money the more efficiently you manage your income. A straightforward method for allocating your monthly revenue to the right categories is to use the 50/30/20 budgeting guideline. It suggests that you should allocate 50% of your income to savings, 30% to desires, and 50% to requirements. You will be able to save for the future, indulge sensibly, and pay your monthly bills by employing this budgeting strategy.
Make a Savings Account
Creating a high-yield savings account is an essential first step in your new career. Establish a direct deposit of 20% of your paycheck to this account if you are following the 50/30/20 guideline. You will be more likely to control your impulse to overspend by doing this.
You will be ready for emergencies and significant future purchases rather than going overboard for a trendy shirt that will go out of style the next season. You may have savings accessible if you seize every opportunity to get a free pizza on campus.
Remember that you will earn more money simply by maintaining the money in your savings account, the higher the rate. Put another way, you will get compensated for saving!
Set aside money for retirement
It is likely that while you are getting used to your new position, you will find out about the retirement plans your company offers. While it may not seem important in your early 20s to save for retirement, you will be glad you did when you are 65 and spending all of your spare time traveling.
There are two ways to start saving for retirement: opening a Roth IRA or a 401(k). If possible, attempt to enroll in the employer match; the majority of employers will match between 4 and 7% of your pay.
Benefit from credit cards that provide cash back.
One of the best things you can do in the early stages of your profession is to build up your credit. If you apply for a mortgage, vehicle loan, or other type of loan in the future, your chances of being approved will increase.
If you use your cash-back credit card for minor transactions that you would normally make with cash or a debit card, you can manage your payments and take advantage of your credit card’s benefits.
For example, if you use your credit card to pay for your morning coffee, you will receive a percentage (typically between 1% and 4%) of the amount you spend at the coffee shop.
You can use the cash equivalent of these incentives to pay off the debt on your card. To prevent incurring interest, you may conveniently use online banking to make payments within 30 days of the purchase. Even if this is not how credit cards are often used, it is still a useful method!
Avoid Lifestyle Inflation
The temptation to enhance your lifestyle—buying the newest digital items, taking trips, or moving into a fancier apartment—occurs when you start receiving a stable wage. This is known as “lifestyle inflation,” and it has the potential to undermine your financial gains. You should not necessarily spend more money just because you make more money.
Rather, make an effort to limit your spending, particularly in the initial years following college. You will have greater financial freedom down the road if you save more money today.
Stay Local
Staying close to home can help you avoid spending a lot on gas and other travel expenditures. You can apply for jobs all over America online, so you really do not have to stray too far as you seek employment. Try walking to places that are within walking distance, and even consider public transportation as an alternative to paying for costly gas.
Spend Thriftily
As an unemployed recent graduate, I really do not know when it is time to be a big spender. Hold off on any pricy items and look for discount alternatives. Buy food and household goods at discount stores such as Smart & Final or the 99c Store.
Continue to use your student card until it expires to get discounts, and try to eat out as little as possible. Find cheap entertainment options such as free movie viewings or local comedy nights, and put any vacation plans on hold.
Conclusion
Trying to find a job as a recent graduate in this tough economy is certainly easier said than done, but by following the above tips, you should be able to stay financially afloat while you search.
You may achieve financial success by making a budget, setting aside money for emergencies and retirement, paying off your student loans, and furthering your education. Starting now is crucial, even if it seems insignificant at first since every cent you save now adds up to a significant sum over time.
