6 Money Steps All New Grads Should Check Off Their List

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As a new graduate, you’ve got a lot on your plate. While this is an exciting time, it’s also an important time to make smart money decisions, including setting financial goals.

“I recommend taking time to prioritize what goals might be most important,” advised Laura Morganelli, a certified financial planner and financial adviser at Abacus Wealth Partners. “Having a clear picture of what success means helps provide necessary structure.”

So what should your financial goals be and how can you achieve them? Financial experts recommend doing six key things as a new grad to build a foundation for financial success.

1. Set a budget

You’ll want to set a budget based on your post-college salary. But this doesn’t mean spending more money compared to your college days.

“Once you graduate college, find a job, and receive your first paycheck, it can be tempting to splurge,” warned Katie Ross, education and development manager for American Consumer Credit Counseling. “But it’s important to live within your means.”

Ross advised calculating total take-home pay, adding up monthly expenses, and ensuring you don’t spend more than you earn. You should keep spending as low as possible to have more money for financial goals.

“College grads should continue living like they’re in college to keep costs low,” advised Andrea Woroch, a nationally recognized money-saving expert.

If you’re not sure how to do a budget, start by tracking spending for 30 days.

“Understanding where your money is going is crucial to achieving financial success,” advised Morganelli.

By tracking how you’re spending money, you can create a realistic budget that’s reflective of your lifestyle but imposes limits in areas where you tend to overspend. You can check out this guide to budgeting to create a budget that responsibly uses your post-college salary.

2. Make a plan for dealing with debt

Chances are good you’ll be dealing with student loan debt, as average debt for new grads reached $39,400 in 2017. You might also have personal loan debt, credit card debt, or a car loan.

It’s important to choose the right repayment plan for all debt, but especially for student loans.

Federal loans are typically deferred while in school, so you might need to pick a payment plan for the first time. There are many repayment options, including income-based plans. Review a complete list of repayment options to help you choose which plan is best.

If you have many areas of debt, you’ll need to decide which to pay first. Paying off higher interest debt makes mathematical sense, but some prefer a debt snowball method to score quick wins by first paying off debt with lower balances. You’ll also want to avoid new debt.

“Don’t rely on credit cards,” Morganelli said. “Depending on a credit card to cover expenses can quickly get out of control.”

She recommended using a credit card only if you can pay off your balance in full.

3. Work on building credit

While you want to be responsible about debt, borrowing helps you build credit.

“Your credit score helps lenders measure your ability to handle your money and repay your debts, which in turn determines the interest rates you pay for your car, mortgage, credit cards, and even rent,” advised Ross.

Paying student loans on time helps you establish a positive credit history. Credit cards, when used responsibly, can also improve your credit score.

If you’re worried about not being able to pay off the balance, you can still use a credit card to build credit.

“Set up one small recurring [and] predictable payment on the card,” advised Michelle Waymire, a financial adviser and blogger at Young + Scrappy.

Waymire advised charging the small recurring monthly expense, such as Netflix or Spotify, and then setting up autopay on your credit card to pay off bills as soon as your statements arrive.

“The benefit is that everything is on autopilot, you can keep your cards at home, and you’re building a consistent payment history with zero effort,” she said.

4. Build good spending habits

While saving is important, you’ll want to have a little fun. You can do that without jeopardizing your financial goals by spending smartly.

“Spending smart isn’t about buying cheap food and home goods,” Woroch said. “Instead, smart shopping has to do with learning the sale cycles, knowing where to find extra savings, and cultivating some impulse control.”

Woroch advised shopping at sales racks, buying generic, and searching for items secondhand using Facebook Marketplace, Tradesy, and local consignment stores.

You can also explore affordable travel destinations and ways to save on groceries and entertainment, such as joining rewards clubs, using coupons, and attending free events.

5. Start saving for retirement

While it might seem like retirement is a long time away, start investing early to take advantage of compound interest and build a big nest egg with less effort.

“Investing early in life, even if it’s a relatively small amount, adds up quickly when you have decades until retirement,” advised Dina Isola, a financial adviser at Ritholtz Wealth Management and personal finance blogger at Real$martica.

Ross suggested checking if your employer offers a retirement plan, especially if the employer matches 401(k) contributions. If you don’t have a 401(k), she advised opening an individual retirement account, also known as an IRA.

Isola also stressed that you should treat contributions to retirement savings as a bill you must pay, just like rent, and advised working up to saving around 20% of income, doing so slowly if necessary.

It’s also important to be smart about the items in which you invest.

“When you invest, be a cheapo,” Isola said. “Tools such as FINRA’s Fund Analyzer can help investors compare costs of different funds. There are also many low-cost fund options, or robo-advisers, if you need more planning help.”

She suggested being “boring” and choosing simple investments, such as index funds.

“Good investing is strategic and methodical,” Isola said. “Excitement is for gamblers, and we all know who gets the good odds in gambling.”

6. Build an emergency fund

Finally, it’s essential to start an emergency fund so that you don’t end up in debt because of unexpected expenses.

“For many recent graduates, living paycheck to paycheck is common,” Ross said. “Even though setting aside some money for an emergency fund might sound unrealistic, saving just $5 a week can help if something unexpected happens, like a job loss, medical bill, or car repair.”

Isola indicated an emergency fund is “the first line of defense against racking up credit card debt,” and suggested keeping your emergency fund in a separate account so you won’t be tempted to spend the money unless it’s a true emergency.

You’ll also want to make sure your emergency fund is big enough to shield you from roadblocks.

“Start with $1,000, then work towards saving up three to six months worth of necessary expenses,” advised Waymore. “If you work in a more stable industry and make a predictable salary, you can get away with three months, but if your employment is more unpredictable, shoot for six months.”

If you start an emergency savings fund and work it into your budget, you can build your emergency fund as quickly as possible so you’re protected from bumps in the road.

Interested in refinancing student loans?

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1 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes.

2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student Loan RefinanceFixed rates from 3.999% APR to 7.804% APR (with AutoPay). Variable rates from 2.480% APR to 7.524% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.480% APR assumes current 1 month LIBOR rate of 2.07% plus 0.91% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

3 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.72%-8.17% (2.72%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.50%-8.69% (3.50% – 8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Average savings based on 18,113 actual customers who refinanced their federal and private student loans through our Education Refinance Loan between January 1, 2017 and December 31, 2017. The calculation is derived by averaging the monthly savings of Education Refinance Loan customers whose payments decreased after refinancing, which is calculated by taking the monthly student loan payments prior to refinancing minus the monthly student loan payments after refinancing. The borrower’s savings might vary based on the interest rates, balances and remaining repayment term of the loans they are seeking to refinance. The borrower’s overall repayment amount may be higher than the loans they are refinancing even if their monthly payments are lower.
2.57% – 5.87%Undergrad
& Graduate
Visit Earnest
2.80% – 6.38%1Undergrad
& Graduate
Visit Laurel Road
2.48% – 7.52%2Undergrad
& Graduate
Visit SoFi
2.47% – 7.99%Undergrad
& Graduate
Visit Lendkey
2.57% – 6.65%3Undergrad
& Graduate
Visit CommonBond
2.72% – 8.17%4Undergrad
& Graduate
Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.