In just a couple of months, a new cohort of college graduates will leave behind their careers as students and start new ones as entry-level workers. And for many — regardless of age — that change brings a whole new financial landscape to navigate.
Gabby DelMonaco, a financial planning assistant in Silver Spring, Maryland, is set to graduate from college this spring. She began budgeting and covering her own living costs when she started college and feels financially prepared to leave school. But she’s not sure her classmates are all in the same position.
“I think a lot of people are just unaware of the reality of how much it really costs to live on your own,” says DelMonaco.
College graduation might mean you land a job and have more money to spend. It also might mean you now have to use that income to pay for living expenses like rent and groceries. And six months after school is over, you can also expect to start repaying any student loans you have.
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As you think through how much your post-college lifestyle will cost, consider all of your expectations. Many expenses — from food and gas to rent and your first living room couch — are getting more costly due to inflation, making it a little bit more challenging to be a new graduate with limited income, says Andrea Clark, a certified financial planner in Fountain Hills, Arizona.
“You just have a better chance for financial success if you start out with a plan instead of starting out haphazardly,” Clark says. Most importantly, making a plan will keep you from living beyond what you can afford, Clark adds.
To do this, you can start by estimating the fixed costs you’ll need to cover and getting a handle on the money you have to work with.
Uncover your fixed costs
The first step in preparing your post-graduation budget is laying out your fixed costs, says Marcio Silveira, a CFP at the same firm as DelMonaco. These are expenses that you can’t forgo, such as housing and transportation costs, as well as any monthly debt repayments.
Pay attention to these costs because you can’t reduce them once you commit, says Silveira. If you have a job lined up with an employer that offers a 401(k) match — a benefit where your employer matches a set amount of your contributions to your retirement fund — try to build this into your fixed costs, Silveira adds.
Student loans are another fixed cost that you …….