5 Lessons for Life After College

As you near graduation, it can feel overwhelming to begin planning for life after college. Set yourself up for a successful future by planning for financial milestones, fine-tuning your professional and financial presence, and creating financial goals.

1. Prepare for Financial Milestones

Though everyone’s path is different, most financial journeys are defined by several key milestones. Anticipating them can help you make smart financial decisions and budget accordingly.

First credit card. Start building credit early but wisely. Responsible use can help you improve your credit score.
Student loan repayment. Know your loan type – federal or private – and loan terms to choose a repayment plan that best fits your situation. Make timely payments to protect your credit score and know who to contact if you need help with repayment.
First home. A stronger credit history may help borrowers qualify for more favorable terms. Down payments can range from 3% to 20% of a home’s purchase price, depending on your lender and loan type, while closing costs are usually 2% to 5% of the purchase price.
Retirement. Save for retirement early, automatically, and consistently. If your employer doesn’t sponsor a retirement plan, like a 401(k) plan, you can establish an individual retirement account (IRA).

2. Guard Your Professional and Financial Image

As you prepare for college graduation and start to apply for jobs, consider how your digital footprint can shape your professional and financial identity.

Professional identity. More than your resume, your online activity – including comments, likes, photos, and posts – can shape how prospective employers see you. Align your digital footprint with potential employers’ values to avoid a possible impact to your job search.
Financial identity. Your credit history is central to your financial image and can influence loans, rental agreements, and even job prospects that require background checks or security clearance.

Uphold a positive professional and financial image by:

Monitoring your credit. Check your credit reports at least once a year and ideally every quarter. Address any incorrect or suspicious information included in them.
Paying your bills. Paying bills on time and in full is the best way to build, improve, and maintain credit. Schedule and track payments for recurring due dates to help ensure you’re prepared and pay on time.
Reviewing your digital footprint. Periodically review your social media content and privacy settings to ensure that no undesirable activity is visible to others. Consider searching your name online to uncover any associated negative content that you should address.

3. Understand Your Income

Securing a job significantly impacts your monthly income, but it's essential to consider factors like taxes, retirement plans, and insurance. Your take-home pay after these deductions is your net income. Knowing where your salary is going will help you strategize your finances effectively.

Taxes. Federal, state, and local tax obligations can reduce your monthly income.
Insurance. In exchange for a monthly payment called a premium, insurance offers protection against potential risks or specific losses. Employer-sponsored health insurance premium contributions may be deducted directly from your paycheck.
Savings. Start saving as early and as often as possible. Prioritize three savings areas: retirement plan, emergency fund, and debt repayment or personal goals.

4. Account for Student Loan Debt

Investing in a college education often means acquiring student loan debt. After graduation, your salary is one measure of that investment’s return. If your monthly payment for a standard 10-year student loan repayment plan is 10% or more of your monthly gross income – your income before deductions it may place strain on your budget.

When planning a budget for student loan repayment, factor in considerations like:

Transportation including bus passes, fuel and/or vehicle maintenance
Housing, whether it’s rent or mortgage payments
Income changes such as promotions or anticipated fluctuations in scheduling (like seasonal employment)
Benefits including insurance and matching retirement plan contributions
Other debts such as credit cards, auto loans, etc.

5. Overcome Hurdles for Your Financial Goals

A starting salary might mean slow progress toward your financial goals, but it doesn’t mean you can’t make strides in reducing debt and building savings. It’s important to mitigate common financial obstacles and make progress on your goals.

High debt. If you have a lot of debt or many kinds of debt, explore debt management strategies, like prioritizing paying off small or high-interest loans or working with a financial counselor.
Low salary. If your starting salary feels limited, consistently save small amounts to build an emergency savings fund that can earn interest and keep late fees and owed interest from eating away at your salary.
Expensive goal. If you have a goal you can’t quite afford yet, that’s okay. Whenever possible, set aside savings for a specific purpose, like that goal. Maintaining a long-term mindset can help you stay focused on what you want to achieve.

Accurate budgeting is a key aspect of reaching your goals. Use your net income in your budget, making sure you understand how much of your monthly salary is deducted for taxes and benefits and how much of it you can spend.