Spring is here, summer weather has begun (in many places), and graduation time has arrived. Across the country, students are finishing their high school, college, and even graduate school lives, after years of hard work, stress, and excitement.
Graduation is a time to celebrate. But what comes next? Whether you are headed for more school or a job, you will likely have new financial concerns. It’s important to think about your money at this time, make some rules you can follow and set yourself on a healthy financial course.
High School to College
Going from high school to college is a major step in anyone’s life. Public high school is free, aside from the fees and expenses for student sports, music, and other activities. However, college is not free, so how can we afford it?
Saving for college. You’ve likely heard us repeat that it’s best to start early when saving for college. There are various online tools to help you calculate the future costs of college. Talk with your financial planner to understand and evaluate some of the following college savings options:
- Education IRAs, also called Coverdell Education Savings Accounts
- 529 College Savings Plans
- Prepaid tuition plans, at some colleges or universities
Student loans. Student loans are widely available to students of all types. According to U.S. News and World Report, about 70 percent of college grads leave school with student loan debt, at an average of $37,172 per student. But with all this student loan debt, is a college degree really worth it?
Financial benefits of a college degree. Many people have had happy, successful lives without college degrees. However, according to The New York Times, people with bachelor’s degrees earn on average $32.60 per hour; while everyone else earns $16.50 per hour.
College to Career
College graduation is a time of hope for the future, but it’s important to stay grounded when it comes to your finances.
So, how should you manage money after college? After you graduate, even if you have a high-paying job, you’ll find that life is not a financial wonderland. The best practices are to spend wisely by living below your means and to plan for the future.
Dealing with credit cards. Living below your means can be hard, especially with all the credit card opportunities you will receive. College students and recent grads receive dozens of credit card offers every month. The best strategies for dealing with credit cards include:
- Use a credit card only when you can pay the bill. Most credit card issuers charge massive interest rates.
- Be careful about opening credit card accounts. The more cards you have, the more temptation to use them and go into greater debt.
- Guard your credit score. Monitor your credit reports and statements to make sure no one’s stolen your identity.
It’s important to know that credit cards can be useful. You need to build your credit history, but you also need to avoid rising credit card debt.
Dealing with student loans. You took out student loans because you knew it would be worth it to get your degree and career, but what should you do about paying your student loans back? Simple: pay the bill when it’s due, but know about student loan repayment options for times of financial difficulty. These options include:
- Deferment, if you return to school or enter a public service program.
- Forbearance, if you don’t earn enough to pay your loans or cannot find a job.
- Repayment plans, which adjust your payments based on your income level.
Right now you may be thinking, “Finances can’t just be about the drudgery of repaying debt. What about the upside?”
When you’re making money, as a graduate in a new career, you can spend and save. There are always opportunities to spend money, but it’s important to consider the best ways to save and manage it.
Amidst all the current expenses of living, eating, driving, marriage, kids, etc., there are important future expenses to consider. These include:
- You just started your career, but it’s important to be ready for the day that it ends.
- Job loss, car repairs, and family changes happen to everyone, so you need to set aside money for these big, unexpected events.
- Major expenses. You’ll want to save toward major, planned expenses, like a home, a new car, a vacation, or even your child’s college expenses.
The reality is that the financial decisions that you make at age 22 can either haunt or help you when you’re 42. This is why planning and prioritizing your goals is essential.
Working with Your Financial Planner
The graduation milestone is about happiness and looking toward life’s future. Now is an exciting time to get started on the right foot whether you’re planning for college, going through college, or graduating from college. Throughout each of these phases, a financial planner can be a great source of guidance. He or she understands the benefits and uses of the specific strategies listed above.
We can help you clarify your goals, build a plan, and take action to live the life you want, that future you hoped for during school.