Financial Literacy For Fresh Graduates & Common Mistakes To Avoid

If you have just graduated, the chances are that you are looking forward to exploring the endless job and earning opportunities in front of you. But such a drastic change of lifestyle comes with its fair share of challenges – especially when trying to rebalance your finances. 

In the US, graduates leave college with a whopping $31,100 in student loan debt – a burden that the average borrower takes 20 years or more to repay. So, this is the perfect moment to take a hard look at your finances and design a long-term plan to achieve financial independence. Here’s what you need to know – and some common mistakes to avoid. 

5 Financial Literacy Tips To Help You Build Long-Term Wealth

Make a Plan to Tackle Your Student Loan Debt 

As a graduate, your student loan debt is likely to be the main hurdle separating you from financial independence. That is why making a plan to tackle this financial burden is the first thing to do. Depending on the kind of student loan you have and your job prospects, you should consider making larger repayments as your financial situation improves. 

If you are not in the position to repay your student loan faster than expected, you could opt to refinance student loans with SoFi to take advantage of today’s low interest rate environment and reduce the amount to repay. 

Take a Hard Look At Your Spending Habits and Create a Budget

Creating a budget – as well as sticking to it – is one of the best finance tips to help you achieve your goals. Depending on your income and outgoings, you could opt to use a well-established budgeting strategy, such as the 50/30/20 rule.

While it might be tempting to spend your first salaries, consider making regular repayments towards your loan and get out of debt as soon as possible.

Pro tip: your financial life will change drastically after college! Avoid surprises by forecasting your future expenses and understanding how much you are effectively taking home each month. 

Keep An Eye on Important Indicators (i.e.: Your Credit Score)

Financial health is made up of several small positive habits to start building today, such as monitoring your credit score, debt-to-income ratio, credit utilization rate, and bank account balance. 

These indicators will be used by banks and lenders when assessing your financial situation, and can make a difference in the kind of mortgages, auto loans, and personal loans you’ll be able to access. 

Have a Long-Term Financial Plan In Place – and Start Saving Today

Learning the basics of financial literacy is important at every age, but it is even more so if you have recently graduated! Your time as a fresh graduate is a delicate one, especially while you are trying to adapt to new expenses, income, and responsibilities. 

While it might feel overwhelming at first, commit to a long-term and short-term financial plan and dedicate time to learning more about ways to grow your money. 

3 Financial Mistakes to Avoid as a Fresh Graduate

Not Understanding Your Expenses and Living Beyond Your Means

Not knowing how much you are taking home each month and what percentage of your income goes towards living expenses can quickly throw your finances off balance. 

Assess how much you can spend while still saving a percentage of your income each month and stick to adequate living standards. 

Not Using Your Credit Card Wisely and Letting Debt Get Out of Hand

According to recent estimates, fresh graduates belonging to Generation Z and Millennials have already collected, respectively $1,963 and $4,322 in credit card debt. 

Using your credit card irresponsibly, going beyond a 30% credit utilization limit, and repaying only the minimum each month can hurt your credit score and steepen your debt. Learn how to use your card wisely to make the most of all the financial tools available to you.

Not Saving and Investing From Day One

If you are one of the millions of Americans who dream to own a home, today is the best time to start saving for it. According to statistics, first-time homebuyers take nearly 8 years to build their initial 20% deposit!

No matter what your goal is, spent money is lost money: start saving and wisely investing now!

Partner With a Financial Advisor

If managing your finances feels overwhelming, or you are yet to get to grips with the basics of financial literacy, consulting a specialized financial advisor can set you on the right path towards long-term financial independence and a debt-free life!

Also Read: The Top 8 Popular Financial Planning Tools You Must Use