By Rachel Caballero, TruWest Credit Union
Your classes are finished, your finals are done, and you finally have your diploma in hand — congratulations graduate! Now what?
As many new graduates enter the workforce or young adults get a new job, what things should they know to help them be financially successful?
Financial literacy is lacking in this country. The American Public Education Foundation’s most recent survey of financial literacy in grades K-12 reports that our country is in “crisis” when it comes to preparing our children for personal finance and decision-making. So, it is important that parents and caregivers step in to teach young adults a few basics to help them succeed.
Here are four foundational areas to address:
1. Learn how to budget
A budget is a plan — a road map to help you track what you earn versus what you spend. Having a budget in place and sticking to it will help guide you toward financial success. Like sticking to a workout regime or piano lessons, it may not always be fun but practice and perseverance can lead you to positive results. To create a budget, first write down all of your fixed expenses.
These include needs like rent, gas, insurance, prescriptions, and groceries — things that you cannot live without. Then, write down all of your wants. These include items like savings, entertainment, subscriptions, and travel.
Next, identify your monthly earnings and subtract your fixed expenses. If you have funds left over, you can dedicate those toward your wants. If your musts are more than your income, you will need to adjust your expenses so that you do no go into debt.
2. Manage student loan debt
The majority of college graduates have student loan debt when they graduate. Knowing what you need to pay off each month is a critical piece to your budget. This will help to keep your loans and amount of debt in check. Working with a financial adviser to determine a more advanced payoff plan is recommended if your income will allow for it.
3. Save for the big stuff
There’s a simple adage that can illustrate this — trade candy now for a car later. The lesson here is to learn the importance of working for what you want and having discipline in your purchases.
Setting a goal of a large purchase such as a car, vacation or house and learning to save for it versus spending small amounts now, will support an understanding of the value of setting financial goals. These goals can help to create a bright financial future.