For new graduates, finishing college or university is a thrilling milestone, signifying the start of a new chapter in their life. As you step into the professional world, it’s important to arm yourself with essential financial knowledge. This blog post offers valuable finance tips specifically tailored for new graduates.
Create a Budget
One of the first steps towards financial stability is creating a budget. Start by identifying your monthly income, including your salary and any additional income sources. Then, list all your necessary expenses such as rent, utilities, groceries, and transportation. If you have a job waiting for you after graduation and can draw an income early on, you can allocate part of the net pay to savings and a discretionary fund. By tracking your expenses and sticking to a budget, you can effectively manage your finances and avoid unnecessary debt.
Manage Student Loans
Many fresh graduates carry the burden of student loans – and in Australia, that mostly falls under the federal government’s HECS-HELP assistance programme. The government estimated that at the end of 2023 financial year, Australian university graduates owed as much as $78 billion – but a recent clerical error in the records resulted in the debts of 13,748 students from 104 higher education institutions being fully written off, equivalent to $5.4m.
If you still have student loans to settle, understand the terms and conditions of your loans, including interest rates, repayment plans, and grace periods. Develop a repayment strategy by making consistent payments to avoid defaulting on your loans. Explore options such as income-driven repayment plans or refinancing to ease the financial strain.
Build an Emergency Fund
Creating an emergency fund is essential for unexpected expenses or job loss. Some financial experts claim that a general rule of this is to save up money to cover six months’ worth of living expenses, with any money left over from settling all important matters automatically set for the kitty. Consider opening a separate savings account to keep your emergency fund separate from your regular spending.
Understand Taxes
Familiarise yourself with the basics of taxation, including income tax brackets, deductions, and credits. Ensure you comply with Australian Taxation Office (ATO) regulations by accurately reporting your income and claiming eligible deductions. A licensed tax agent can get you started with the mechanics of declaring the returns.
Start Investing Early
Take advantage of the power of compound interest by starting to invest early. Consider opening a retirement account such as a superannuation fund. Contribute regularly and explore different investment options based on your risk tolerance.
A financial advisor may be critical if you are looking to make informed investment decisions early in adulthood; Findex investment relations chief Matthew Swieconeck said an alum’s parents can also be good investment advisers if they have had ample experience in the field and have built a nest egg for themselves. Under current super rules, regardless of how much your monthly pay is, your employer must still contribute part of your pay to your superannuation account, as the ATO is ramping up efforts to recover unpaid supers.
Live Within Your Means
Avoid the temptation of overspending to keep up with others or indulging in unnecessary luxuries. Prioritise needs over wants and focus on building financial stability. Distinguish between essential and discretionary expenses, and make conscious choices about where to allocate your money. Remember that long-term financial security is more important than short-term gratification.
Build Credit Responsibly
Establishing a good credit history is crucial for future financial endeavours. One way to build good credit is to apply for a credit card with a small credit limit and learn to use it responsibly – some young adults, though might advise against applying for one as it may be akin to “financial suicide” if the swipes were not under control.
Pay your bills on time and in full each month to avoid interest charges. Monitor your credit report regularly to ensure its accuracy and dispute any errors promptly. Responsible credit card usage can help you qualify for loans, mortgages, and lower interest rates in the future.
Remember though that if you are still paying off any student loans, they may reflect in your credit card application.
Continuously Educate Yourself
Financial literacy is an ongoing process. Stay updated on financial news, trends, and investment strategies. Read books, attend workshops, or take online courses to enhance your financial knowledge and make informed decisions. Being well-informed will empower you to navigate the ever-changing financial landscape confidently.
Track Your Expenses
Keeping track of your expenses is crucial for understanding where your money is going, which can be possible with special budgeting apps or spreadsheet programs. Categorise your expenses and identify areas where you can cut back – the extra money you save may be reprogrammed for other vital matters such as paying off debts or utilities at home. By analysing your spending patterns, you can make necessary adjustments to align your expenses with your financial goals.
Minimise Debt
Avoid accumulating unnecessary debt and work towards paying off existing debts as soon as possible. Prioritise high-interest debts, such as credit card balances, and develop a repayment strategy, including possible debt consolidations or negotiating with creditors. Minimising debt early on will provide you with more financial flexibility in the future.
Save for Retirement
Some of your peers or older relatives may advise you to start preparing for retirement while still young – that wisdom may actually be correct. Take advantage of employer-sponsored superannuation funds, and research on potential options to transfer super providers in case you change employers. The power of compounding over several decades can significantly grow your retirement savings.
Insurance Coverage
Take out an insurance policy for yourself and your assets. Consider health insurance, car insurance, renter’s or homeowner’s insurance, and disability insurance. Research different providers to find the most suitable coverage options for your needs. Insurance will help you financially prepare for unexpected events and can provide a safety net during difficult times.
Networking
Building a strong professional network can open doors to career opportunities and financial growth. These can be done by attending industry events, joining professional organisations, and connecting with fellow graduates from your university. Seek mentorship from experienced professionals who can provide guidance on career advancement and financial decision-making. Networking and mentorship can be invaluable resources as you navigate your professional journey.
Negotiate Your Salary
When starting your first job or transitioning to a new one, don’t shy away from negotiating your salary. Research industry standards, understand your worth, and confidently discuss your compensation expectations with potential employers. Salary talks can have a significant impact on your long-term earning potential, so be prepared and advocate for fair compensation.
Plan for Major Milestones
While focusing on your immediate financial needs, it’s essential to plan for major milestones in the future. Whether it’s buying a home, starting a family, or pursuing further education, consider the financial implications of these milestones. Start saving early and explore options such as investment accounts or education savings plans to meet your future goals.
Prioritise Self-Care
Taking care of your physical and mental well-being is an integral part of your overall financial success. Prioritise self-care to maintain a healthy work-life balance and reduce stress. Practice mindfulness, engage in regular exercise, and cultivate hobbies that bring you joy. By prioritising self-care, you can improve your productivity, focus, and overall financial well-being.
Seek Professional Advice
If you feel overwhelmed or unsure about managing your finances, don’t hesitate to seek professional advice. Financial advisors can provide personalised guidance based on your unique circumstances and goals. They can help you develop a comprehensive financial plan, navigate investment options, and make informed decisions. Consider consulting a certified financial planner to ensure your financial strategy aligns with your long-term objectives.
Conclusion
As you transition from being a student to a working professional, implementing these finance tips can pave the way for a financially secure future. Remember, the choices you make today will have a significant impact on your financial well-being and long-term goals. Stay disciplined, remain focused, and always prioritise financial responsibility.
DISCLAIMER: This article is for informational purposes only and only constitutes general financial advice. 2 Ezi has no relationships with any company or government office mentioned in the article.
