For many, the challenge of personal finance begins after college. This is the most difficult time to embark on the path of fiscal responsibility. There are loans to be paid. There are new expenses to meet. Questions about 401ks, IRAs, and savings accounts arise. However, all recent college graduates have one key advantage that equips them for success; they have time on their side. In this article, we’ll look at the seven critical steps a recent college graduate can take to leverage the value of time. As a result, you’ll set yourself down the right path when it counts the most: the beginning.
Build Your Credit
Your credit score will be the single largest determining factor when you eventually become a homeowner. To build credit, you need a credit line offered by a credit card and respectable payment history. Avoiding a credit card may seem like a method for curtailing temptation. However, the absence of credit is poor credit.
Your FICO credit score includes:
- 35% Payment History
- 30% Amounts Owed
- 15% Length of Credit History
- 10% Credit
- 10% New Credit
Commit to a Savings Plan by Paying Yourself First
Without some form of medical care in the 12 months before the survey, they could not afford it.
The bottom line: save at least 15% of your earnings. How do you do this? The answer: through proper budgeting. Put your budget on paper and commit to the plan. Any budget should include some form of savings that you pay to yourself before anything else. It’s too easy to let a savings goal drift at the expense of other consumables.
Consider opting into savings programs offered by credit card companies. Chase offers a simple program to accomplish regular savings through scheduled deposits. Citi has a similarly robust system for regular transfers from a checking account into a savings account. There’s nothing to remember, and the savings will grow.
Automate Your Savings
Automatic savings plans are the single most powerful tool in personal finance.
Consider a National Bureau of Economic Research study which concluded that automatic enrollment results in workers joining the savings plan and a significantly faster rate. In one case, a company that switched from an opt-in set up to an automatic enrollment setup found that the participation rate saw a 35% increase. Even more impressive were the long-term results. Many of these automatically enrolled employees remained in the plan to the extent of 25% after two years. Start automating your savings, and the route to success will be smooth.
Harness The Power of The Zeigarnik Effect
How can this be applied to personal finance? The answer is just as simple as the concept; start by opening the necessary accounts today. This first step will dramatically increase the likelihood that you follow through on making regular contributions to those accounts. Start with these:
- 401k or 403b
- Roth IRA
- High Yield Saving Investment Account
- Credit Card Account
- Money Market Account
Get out of Credit Card Debt
The cost of education is high. The expense comes from tuition and supplies like textbooks and equipment (e.g., a laptop) to support the payments. Credit cards optimized for balance transfers can help. You can transfer a balance from a card with a high-interest rate to another card with a lower interest rate. The transfer makes payment easier as the financing charge drops.
Cards like Chase Slate are great ways to expedite the process of getting out of debt. The APR ranges from 13.24% to 23.24%. If these rates are lower than your current card and your balance is high, consider making a switch. The card offers these balance transfer benefits:
- No balance transfer fee during the first 60 days of holding the card.
- A 5% fee on the amount transferred after the introductory period.
- 0% APR.
- No annual fee.
To capitalize on the Chase Slate offer’s value, the user must pay careful attention to the 60-day introductory period. After this, the benefits of moving a balance aren’t powerful, though. Try to front-load your efforts. The first 12 months offer the greatest value on APR and fees.