It’s easy for recent grads to wake up the day after graduation and wonder what in the world they’re going to do next. If this is you, you’re definitely not alone. You’ve just accomplished one of life’s most admirable milestones and you’re about to experience a major transition.
Believe it or not, there are even bigger (and more expensive) steps ahead than graduation: like traveling, relocating, or even buying a home. The ‘real world’ is an intimidating place, so your mind — and your wallet — need to be prepared.
Read on to find out what you should and shouldn’t do with your money after college to ensure the smoothest post-grad transition into adulthood.
Do: Get a Grip on Debt
Student loan debt, specifically, affects a huge amount of graduates in the US – as much as 14.4% of adults carried an average of over $35,000 in loans at the beginning of 2019. But that doesn’t mean you can’t tackle that debt and make room for some of life’s most exciting ventures.
Once you get a handle on your outstanding debt, you’ll be able to tell which moves you can make. Simply put, the less debt you have, the better the chances are of banks approving you for a loan for big purchases, while the more debt you carry, the poorer your likelihood.
If you want to move out of your cramped dorm and into a new home of your own, it’s important to pay down as much of those loans as you can to make room for any new ones. Assess your situation with dreaded student loans as soon as possible and adjust your spending habits to ease your financial burden post-graduation.
But don’t jump into too much debt after college. Rather than taking out a loan to buy a car, try buying a used vehicle to avoid the additional monthly expense. Adding debt onto existing debt can hurt your credit score and qualifications for loans, so attempt to commit only to investments you can handle in the present.
Do: Your Research
When you’re starting to think about making any big money moves, do your due diligence. Take buying a house, for example. Before jumping right in, you obviously need to know how much the home costs and what your mortgage payment will be. But it’s crucial that you take a deeper dive into the necessary information because odds are you don’t know everything about mortgages.
Did you know that aside from the cost of the house itself, buying a home is associated with closing costs and appraisal fees? Or that lenders offer services like refinancing? If you’re asking yourself – “What is an appraisal fee? What is mortgage refinancing?” – don’t worry. A little bit of research can familiarize you with the investment and offer some peace of mind.
Compare all options when applying for loans, don’t make any rash decisions, and talk to experts or even family members to find out how much you’re really going to spend.
But don’t forget to think long-term. Major loans like a mortgage can last anywhere from 15-30 years. Since you could live a completely different lifestyle by that time, make sure you consider your career and family values and plan out what your life could look like to determine whether this investment will still work decades into the future.
Do: Start Saving
It’s clear that buying a car or a home while paying off loans can add up. And you might start to think: “Can I afford to do what I want? Will I be able to book that trip to Europe? Do I have enough money for a down payment?”
While having a number of monthly payments can be daunting, with the right spending habits and strong willpower, you can save the necessary amount of money to be able to afford those celebratory post-grad trips or down payments. That said, start saving your money as early as you can, especially during school. Limit your spending, take advantage of student discounts, and look for odd jobs so you can set aside money here and there.
Building up a nest egg will not only open up opportunities, but it will also give you a safety net to fall back on if any surprise expenses pop up. And when your bank account is low and your friends want to book a flight, you won’t have to pass up on an experience of a lifetime.
But don’t travel all your savings away. While a tropical getaway seems like it might be the only thing to scratch your itch, it’s not always financially practical. Or, if you’re on vacation, don’t splurge on each and every indulgence available. Find ways to limit spending on vacation and utilize travel apps to save money on flights and hotels.
About Lauren Nowacki: Lauren is an avid writer with a special interest in finance and the home buying process. She’s using her own experiences to share knowledge with others looking for guidance in all things budgeting and post-grad living.