So, the big day has finally arrived, and you’re graduating from college! There are so many exciting things to think about, like starting your career, finding a place to live, becoming independent. But then you start to think about how you will pay for it all, and the concerns begin to kick in. Well, don't worry – HBCU CDAC is going to help you with five easy steps that you can take to get your finances in order and stop stressing!
1. Put together a plan for paying off your student loan debt
A. Assess – Add up all loan balances and note the interest payment and minimum monthly payment for each one.
B. Create a budget – Develop your budget based on living expenses and whether your current budget will allow you to make the minimum payments to your loans and still have enough left to cover basic living expenses.
C. Set a goal – Set yearly goals for how much student debt you want to pay off. As you start making more money, begin increasing the goal. You don't want this hanging over your head for longer than necessary.
D. Restructure and refinance – Consider consolidating and/or refinancing your loans to get a lower rate and streamline monthly payments. You may have to obtain a co-signer like your parents, but it will most likely lower your costs, especially as borrowing rates are so low right now.
E. Monitor your progress – Set up an auto-payment if possible but don't get set it up and ignore it after that. Make sure that you are paying off as much as you can as soon as you can. Also, it may be worth looking into federal student loan forgiveness if you’re planning a career in public service.
F. After you graduate, leave school, or drop below half-time enrollment for most federal student loan types, you have a six-month grace period (sometimes nine months for Perkins Loans) before you must begin making payments. This grace period gives you time to get financially settled and to select your repayment plan. However, don't wait to start paying if you already have a job secured, as a little bit right away is better than nothing.
2. Open a savings account
Since you have already created your budget and decided how much you need to pay each month on your student loan, you may think you don’t have enough left to start saving. However, every little bit counts. Do you need that Latte every day at Starbucks? You could save about $30.00 a week or $120.00 a month simply by not paying for coffee every day.
Once you have your account opened, make sure also to set up an automatic withdraw. Take a designated amount from your paycheck every month and have it automatically deposited into your account. The less you have to think about it, the more likely you are to save.
Shop around for the best savings account based on the annual percentage yield (APY) you can earn, monthly fees, and minimum balance requirements. Most savings accounts don't pay a very high-interest rate, so you should also consider a money market account or a certificate of deposit (CD) for long-term savings. Keep cash available for emergencies but try to put more savings into a CD, which is not liquid but will pay a better rate. With a money market account, you can earn a competitive rate on savings while enjoying check-writing privileges.
3. Get a credit card
A credit card can enable you to make purchases when you’re short on cash but can also help you earn rewards as well as start building your credit history. However, it can also get you in trouble, so don't learn the hard way. If you can't afford to pay your credit card in full each month, then hold off on buying something. That item will end up costing you many times over what it’s worth if you pay interest on that purchase every month. While a regular savings account only earns you a small interest rate of .04%, the average interest rate on credit cards is 16.5%!
Shop around and get the best card with the lowest interest rate and the best perks based on your lifestyle. For example, don't get a credit card that gives you travel points if you never can afford to travel. Also, start with one card and one card only. It is much harder to keep track of purchases if you are using multiple cards, and again, set up an automatic withdraw so that the entire balance is paid from your account every month. Reading credit card reviews is an excellent place to start exploring the best credit cards and their features.
4. Work benefits
As you evaluate job opportunities, think about the whole package and not just your salary. The highest salary may seem like the best bet unless you consider that the company only pays a small portion of your medical expenses or doesn't match your 401K plan. Things you should consider:
· Access to a 401(k) or similar retirement plan – do they match what you put into the plan? Think of that as free money that you don't pay taxes on and doubles what you are saving.
· Health insurance and health savings account – what is the average deductible? Do you have to contribute via your paycheck to your coverage?
· Life and disability insurance
· Wellness programs – does your company offer free gym membership or access to other types of wellness programs?
· Student loan forgiveness or reimbursement – or maybe they offer a sign-on bonus that can help you pay off a portion of your loan in a bulk sum.
· Tuition reimbursement – does the company pay for classes you might want to take or an advanced degree? Do they allow for time off if required for the course?
· Special discounts or free lunch, etc.
· Stock options or opportunities to buy company stock at a reduced rate.
Company perks can add up, and they also may be more valuable in aggregate than a slightly higher salary. And don’t forget that you negotiate some of these things before you accept an offer.
5. Financial education
Finally, educate yourself as much as possible. Knowledge is power. Figuring out your financial plan can be intimidating, especially if you do it for the first time. Fortunately, there are many available tools and resources that can help you get started. For example, OurMoneyMatters.com offers a free and customized online portal for participating HBCUs and MSIs that you can utilize as a student or after you graduate. You can also sign up for free even if your school isn’t participating. Online tools include videos on investing strategies, budget plans and calculators, refinance programs, credit card information, etc. The best way to get on a financial wellness path is to know your options.
In the end, we each choose whether we manage our finances or whether they manage us. We all know that living paycheck to paycheck can be highly stressful. So, now that you have a college degree, you can get a good job. But you could still end up financially unstable unless you take proactive steps. That might mean doing just a little more studying, but now it will be in the best interest of your financial future!
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