After the tassels have been turned and the mortarboards thrown into the air, many college graduates are about to be on their own for the first time. Their first step, financial experts recommend, should be taking stock of their finances. “Grab hold of your financial life,” said Jill Schlesinger, a certified financial planner and “ambassador” for the Certified Financial Planner Board of Standards, which certifies and sets standards for planners.
Much about managing money depends on habit, she said. “If you form good habits early,” she said, “you continue them throughout your life.” The top priority? Get a handle on student loans.
Most federal student loans come with a grace period after graduation — typically, six months — during which borrowers don’t have to make loan payments. So use this time to make sure you have a repayment plan you can afford, said Diane Cheng, associate research director at the Institute for College Access and Success, a nonprofit organization, “This is a really important time for recent graduates to get on top of their loans,” Ms. Cheng said.
Note the amount, the interest rate and the expected monthly payment of each loan, she said. If the total is unmanageable, consider applying for a payment option that links your payments to your income. You’ll usually pay more in interest over the long term, but you’ll gain financial breathing room now. Recent federal data shows that borrowers with the standard, 10-year student loan repayment plan are more likely to have trouble keeping up with monthly payments than those in some other plans that tie payments to your income, Ms. Cheng said.
Also, she advised, update your contact information with your loan servicer — the company that collects your payments — to make sure you get statements and other information on time.
Student loans, of course, are just one expense that new graduates face. Michael Eisenberg, a member of the American Institute of Certified Public Accountants’ National C.P.A. Financial Literacy Commission, advises new graduates to do a simple “cash flow” analysis. “How are they going to manage what comes in,” he said, “with what’s going out?”
For a first step, Mr. Eisenberg prefers an old-school approach: Get a piece of paper and draw a line down the center. On one side, write down the money coming in from your paycheck or part-time gigs. (Having a steady job is more likely this year for new graduates, he said, because of a strong job market.)
On the other side, list the money going out. Focus first on fixed costs, he said — not just student loans but also rent, car payments, insurance and the like. Be sure to include an amount, even if it’s small, for emergency savings. Then list variable expenses, like weekend getaways, summer vacations, perhaps saving for a special gift for a girlfriend or a boyfriend. If there’s a big gap between income and expenses, Mr. Eisenberg said, adjustments are in order.
If money is tight, new graduates can think about what they might do without, Ms. Schlesinger said. Do they really need a car and its associated costs? If they live in a city like New York, she said, probably not. In some cities, she noted, options have expanded beyond public transportation and ride-hailing apps to include scooter- or bike-sharing services.
Living at home, at least temporarily, is another option, especially if you get along with your parents and they aren’t charging you rent. Mr. Eisenberg said one of his own young relatives had chosen to live at home after graduation and to use the money that would have gone to rent to pay down student debt. “Free is good,” Ms. Schlesinger said.