Life after college isn't all fun and games. As you turn your back from formal education and enter a brand new school called life, you'll find yourself trying to make a living for yourself, facing a whole lot of responsibilities and finding a new meaning for the value of money.
As of this moment, you are probably trying to kick off your professional career and attempting to be completely financially independent. To help you take control of your finances in the first few years after graduation, here are five winning money tips for you.
1. Clearly define your financial goals
Setting your financial goals is probably not the first thing in your mind after graduating from college. Though you may already have some vague idea on what you want to spend money on (i.e. gadgets, your very own condominium, a brand new car etc.) they might not be concrete or well thought out.
Defining your financial goals is not all about when and how you're going to spend your money. Instead, it's mostly about setting significant financial milestones to work towards and help you keep focus.
Your financial goals should be divided into three depending on the time-frame.
A short-term financial goal is something that you want to achieve in the near future, maybe in the next one to three years. It could be paying off your debt or saving up for your MBA. A medium-term financial goals can last for four to seven years such as growing your portfolio of investments or putting a down payment for a house. Finally, a long-term financial goal can go beyond 7 years and may even last a lifetime. It can be anything from saving for your children's trust fund or paying off your mortgage.
2. Make a detailed budget
Now that you are making your own money, you might be tempted to make an upgrade from your old college lifestyle and start splashing out on certain fancy things. While occasionally treating yourself can relieve you from fatigue and stress, you should know what your boundaries are. That's when budgeting can become very helpful for you.
Financial educator and co-author of "Smart Money, Smart Kids", Rachel Cruze, tells her readers to "be intentional with your money," explaining that you should budget so you know exactly where your hard-earned cash is going, rather than wondering where it all went.
To begin budgeting your money, add up the essentials, like your monthly rent, groceries, utilities and transportation. Doing so will let you know how much is left over for other spending and saving.
A detailed and planned budget plays a vital role in keeping your expenses and savings on the right track.
3. Spend within your financial capacity
Big ticket items like cars and condominiums may be the ultimate exercise of your spending prowess. But if you're like most young professionals who are fresh off college, then you probably don't have the means to buy such things.
Even things like happy hours, gym memberships and out-of-town trips may sound fun and tempting when you start getting paid by your job but these small luxuries can easily eat away your budget.
Always remember to live and spend within your means. That means that what you spend for each month should be less than or at least equal to your monthly income. Don't feel compelled to spend for anything that you can't really afford.
And credit cards? As much as possible, avoid using them. You are basically spending money you do not have everytime you swipe your credit card. Remember, if you can't pay for a purchase in cash, then you probably cannot afford it. If it's just an issue of convenience, use debit or prepaid cards instead.
4. Automate your savings
"Once you have established a budget and have clear short- and long-term goals, one easy way to get in the habit of saving money toward those goals, is to simply automate it," says Jamie Pomeroy, Financial Advisor at MerchantsBank. "Set up regular and automatic deposits into your investment and savings accounts, either directly from your paycheck or from your checking account."
"This is such a simple practice that will pay tremendous dividends in the future. To help you with this, you may also want to check out technology tools that might just make your savings life a little easier," Pomeroy Adds.
Thanks to technology, it's quite easy to automate pretty much everything in our life - making coffee, sending emails and saving money. Most banks nowadays have the option for you to register your account online and schedule monthly deposits to your savings account. You can schedule these transfers monthly or even bi-weekly to match your payroll schedule.
Automating your savings is an easy and convenient way to save on a continual basis. At the same time, it also helps you stay on track with your savings goals, ensuring that you deposit your monthly savings money instead of spending it on something else.
5. Plan for retirement
You just graduated from college and just starting out with your professional career, isn't it a little premature to plan for retirement?
Even though retirement, for a fresh grad like you, seems like a whole lifetime from now, it's never too early to start saving. This is especially true if you want to retire early which is what most millennials aspire to do.
If you want to take charge of your financial future, plan your retirement carefully and start saving as early as now. While it is understandable that you may have more pressing needs right now, you can always start small with your retirement fund. As your monthly income increases, so should the money that you save for your retirement fund each month.
To sort out your financial concerns, it's also best to talk to an adviser to help you lay out a plan for your retirement while guiding you in managing your current financials. A financial adviser will not only help you establish a retirement fund but he or she can also give you advice in securing you and your family's financial future.
While these money tips are meant to point you to the right direction, you'll also need more information on how you should handle your finances as a young professional. It always helps to do your research, read books and talk to experts. Ask questions about how you can better manage your money and more importantly, make sure that you understand the answers.
You should secure your financial future as early as now. The sooner you master how to properly manage your finances, the better off you are going to be.
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