Student Financial Management After Graduation: How to Take Control of Your Finances

While the excitement cannot be taken away from graduation, the cruel truth is that it initiates many into the financial world. More often than not, students graduate from college with a load of student loans, averaging $28,950 per borrower in the United States alone. Proper financial management will play a major part in your post-college life.

Be it paying for student loans, planning for savings, or a budget for daily living, having a plan in place will prepare you long into the future.

1. Create a Post-Graduation Budget

Budgeting is an important step right after graduation to manage your finances. A well-planned budget will help trace your spending and ensure money goes to necessities such as rent, utilities, food, and loan repayments. I have already talked about this, but again, start calculating your monthly income and apportion it into categories such as:

• Necessities (50%): Rent, groceries, transportation, insurance
• Savings & Debt Repayment (20%): Emergency fund, retirement savings, student loan payments.
• Personal Expenses (30%): Entertainment, dining out, hobbies.

If you stick to a 50/30/20 rule, you'll have a better handle on both your needs and your savings. According to the Federal Reserve, about 40% of Americans would struggle to cover a $400 emergency building a small emergency fund early on is key.

2. Refinance Your Student Loans

Refinancing student loans is one of the best options available to manage your debt load after graduation. Refinancing can allow you to take multiple loans and put them into one loan, possibly at a lower interest rate that may lower your monthly payment or shorten your repayment term. This would be great, especially if your federal loans have high interest rates or if you had any private loans.

For example, if you refinance a Parent PLUS loan of 30,000 from an interest rate of 6.8% to 4.5%, you could save over $5,000 in interest over the life of the loan, depending on your repayment terms. With excellent credit, some lenders may offer rates as low as 2.99%, potentially increasing your savings even further. These lower rates can significantly reduce your monthly payments and the overall cost of the loan.

3. Enroll in Income-Driven Repayment Plans

If refinancing isn't right for you, try signing up for an IDR plan. The IDR plans to cap your monthly federal student loan payments at 10-20% of your discretionary income and extend your repayment term to 20 or 25 years. While extending your loan term means you'll pay more interest in time, it can provide immediate relief if you're struggling with high monthly payments.

In fact, 32% of federal student loan borrowers are enrolled in one of these income-driven repayment plans, which goes a long way in making your life easier when starting at a new job or career. 4. Focus on Debt Repayment Strategies

Apart from student loans, graduates may have credit card debt or personal loans. When attacking debt, focus either on the avalanche method, which pays off high-interest debt first, or the snowball method, which pays off the smallest balances first. Such approaches will reduce overall interest costs and can provide a sense of accomplishment when one starts wiping out the debts one after another.

For example, the U.S. average credit card interest rate is 19.49%, so if you have credit card debt, paying that down before moving on to lower-interest student loans could save hundreds of dollars a year.

5. Get an Early Start on Retirement Savings

Even though retirement is still years away, there is simply no better time than now to start saving. If your employer offers a 401(k) match, contribute enough to maximize it. The average match is 3% to 6% of your salary, and not taking this "free money" can cost you thousands over time. If your company doesn't offer a retirement plan, consider opening a Roth IRA. Roth IRAs allow your money to grow tax-free, and you can contribute up to $6,500 per year as of 2024 (or $7,500 if you're 50 or older).

Even saving as little as $50 a month starting in your 20s could grow to nearly $60,000 by the time you retire, assuming a 7% annual return. This can help alleviate some stress in the future and lead to a bit more secure retirement.

6. Automate Your Savings

The best way to make sure that you save regularly is by automating your savings. Create an automated transfer from your checking account into your savings account with each payday. Whether you want to build up your emergency money, save for a down payment on a house, or a future investment, automation prioritizes saving without having to depend on your willpower.

A good target is to attempt to save 15% of your income for long-term goals. If you can't start with 15%, starting small and increasing the savings rate over time will pay dividends in the long run.

7. Build Credit Responsibly

After graduation, you must establish good credit. Good credit helps you acquire loans, rent an apartment, or even land a job. Pay the full amount of your outstanding credit card balance each month to avoid paying interest and to develop a good credit history. The factors affecting your credit score will include payments, the amount owed, and history.

According to FICO, the national average credit score in the U.S. is 716. However, striving for an above-750 credit score will give better exposure to higher interest rates and other financial products.

8. Utilize Financial Tools and Apps

There are a lot of free financial tools out there that can help you take control of your finances once you graduate. These range from applications like Mint or You Need a Budget, which can help you track where the money's going, enabling you to create budgets and even set savings goals.

In fact, according to a survey done by NerdWallet, 68% of millennials track their spending using financial apps. These financial applications allow you to have up-to-date views and insight into your finances in real time to make tracking easier for you.

Graduating from college marks a new beginning; the new financial responsibility goes hand in hand with this experience. You can take charge by making a budget, refinancing your student loans, and emphasizing saving. Keep in mind that managing finances is like a marathon-complete these baby steps with continuity, and this will build good habits that you will enjoy in the future.