You’ve heard the saying, “Life comes at you fast.” Perhaps nowhere is this more true than with your finances post-graduation.
Regardless of whether you worked through college, you likely took out student loans to cover at least a fair amount of your expenses … and now they’re due.
For most of us, the first few years following school are, well, a little tough financially — making smart money management a must. Here are five tips to get you on the path to financial freedom.
1. Set a Budget
If there’s one mistake most of us have made at some point, it’s not setting a budget. Maybe you watch your bank account like a hawk. While that’s a good practice to get in the habit of, it does little to give you true perspective on what you are spending vs. have to spend.
Fortunately, budgeting is a lot easier than a lot of people act like it is. Maybe it’s just because people don’t like to think about money. To determine your budget, total the money you have coming in each month after taxes, then subtract all of your set monthly expenses. These could include:
- A car payment
- Rent or mortgage payment
- Utilities bills (water, electricity, trash, internet)
- Student loan payments
- Credit card bills (assuming you have credit debt, in which case you should be paying more than the monthly minimum)
- Monthly subscriptions (newspapers and magazines, streaming services)
- Any other monthly expenses (for example, parking)
- How much you are setting aside as savings (more on this in a bit)
Now that you have this number, you should have a clearer understanding of how much you have left for everything else, including groceries, entertainment, lunches or dinners out with coworkers or friends, and so on.
2. Curb Your Spending
It’s tempting to write off that cup of coffee on the way to work, or the lunch with coworkers, but those small purchases add up a lot quicker than you might realize.
Let’s take a closer look at that morning cup of coffee as a prime example.
Four dollars might not seem like much, but multiply it by 20 weekdays and now you’re spending $80 a month ($960 a year). That’s assuming you don’t go back for another.
By brewing your own coffee, you’ll not only save money, you’ll have a lot more coffee should you want a second, third or fourth cup (we’re not judging).
Now consider lunch with your coworkers. When you’re starting out your career, that lunch invite can be hard to resist (assuming we’re not living in a pandemic).
However, those lunches can quickly break the bank. Let’s say you go out to lunch three days a week at $10 a week. That’s another $120 a month (and $1,440 a year!).
By packing a lunch and committing to only go out for lunch even once a week (if not once every other), you will save considerably.
The same goes for a variety of purchases. And because you set a budget, you should have a better idea of how much you have to spend.
3. Look for Opportunities to Save
Ok, so coupons may not be cool, but you can save a lot of money by being a savvy shopper. But it’s no longer just clipping coupons. Now, many grocery chains have apps that allow you to download coupons directly to your shopping rewards card, making it even easier to save. And just as every purchase adds up, so does every penny saved.
When grocery shopping, it’s also well worth it to look at the price breakdowns to be sure you’re getting the best value. For example, while it might be cheaper to buy a smaller portion in the present, if it’s something that doesn’t expire, you might do best to buy cheaper in bulk.
However, it’s not just small purchases like groceries. Say you need some new clothes for work. By signing up for a store’s email, you’ll inevitably receive a discount code so you can save on those items you had intended to buy anyway. Just be sure to consider whether you’re buying something because you needed it and were waiting for the right deal or because it seemed like a good deal. The latter makes a very powerful case for why you should unsubscribe from those promotional emails once you have what you need.
4. Be Careful with Credit Cards
Credit cards are great for a lot of reasons: You don’t need to carry a bunch of cash around with you, they give you a line of credit in the event of an emergency, allow you to build credit and you might even accrue rewards or airline miles when you make purchases.
However, they can also lead to financial ruin if you’re not careful, especially if they charge a high interest rate and/or you only make the minimum payment.
Keep in mind that when making the minimum payment, you may very well end up paying more in interest than for the items you purchased in the first place.
The best scenario is to pay off your credit card each month, thus allowing you to reap any benefits without paying interest. However, if you can’t pay in full, review the statement carefully to determine how long it will take to pay off paying the minimum vs. the three-year payoff (or whatever your particular statement lists). This can be immensely helpful in determining how much you should budget to pay each month.
5. Save for the Future
Finally, you have to save for the future, whether it’s retirement or a car emergency. To avoid dipping into savings, it’s best to set up a separate savings account that you can move a set amount into each month, preferably the day you get paid so that you aren’t tempted to use any of it.
Also critical: Saving for retirement. Yes, it may be a long way off, but the sooner you start saving, the more you’ll have in the long run.
Think of your retirement savings as a snowball rolling down a hill. The higher it starts (meaning the farther it has to roll), the more time it has to pick up momentum. And luckily, many employers offer 401(k) accounts. While you might feel conflicted about contributing the full amount your employer will match while eating ramen noodles for lunch to save money, it will pay off big in the future.
Need help getting started?
Lambda Chi Alpha has partnered with SoFi to offer members access to SoFi’s Financial Wellness Dashboard—a one-stop platform to help you manage your money, all in one place. Through the Dashboard, you can set monthly spending targets, connect all of your accounts, monitor your credit score, and more.
To get started:
- Visit SoFi.com/LCA and enter chops as the code
- Create a new SoFi account (or log into an existing account)
- Go to the Your Finances section and select Link accounts to start managing your money