Spring is the perfect time for young Americans to take a look at their budgets and become financially fit. Not only is April Financial Literacy Month, complete with nonprofit organizations around the country offering free seminars and online resources, but millions of high school and college students are also preparing for graduation and the next phase of their lives.
But are new grads ready for the financial challenges that lay ahead? The average student loan debt for borrowers in the college class of 2011 was about $ 26,500, according to a report by the Institute for College Access and Success’s Project on Student Debt. While the National Association of Colleges and Employers projects that 2013 college graduate hiring will increase about 13 percent, budgeting for the start of a new career can be overwhelming. Budgeting money from that part-time job at the mall for movie tickets and other entertainment expenses is quickly replaced by rent, utilities, food and transportation costs as well as student loan payments.
Fortunately, many tools and tips are available for new graduates to get started with budgeting and saving. Microsoft Office offers a free personal budget worksheet to help track income and expenses each month. Several organizations offer free tips for saving money and budgeting on a lower income, which is typical for entry-level jobs.
“Effective budgeting and saving is essential for young adults to reach their personal and professional goals,” says Matt Chevalier, senior vice president for TD Bank. “Being able to afford everyday living expenses, transportation to work, and essential insurance coverage all begins with understanding your income, your expenses and how and where to save money.”
The not-so-obvious expenses
Recent graduates must also prepare for those under-the-radar expenses, such as auto insurance premiums, health insurance contributions and banking costs. While in school, most students can stay on their parents’ or guardians’ auto and health insurance plans, but not long after graduation, they will be required to purchase their own plans, either independently or through their employer.
Student bank accounts can also change soon after graduation, but many banks, such as TD Bank, feature a checking account selector tool that compares checking account options to best fit customers’ needs and help them save money on fees. To help facilitate saving, new grads should set up direct deposit with their employer and connect a savings or money market account to their checking account, automatically transferring a manageable amount from each paycheck to build savings.
“Joining the professional workforce is an exciting and challenging time for young adults, and all the new expenses can seem overwhelming at first,” says Chevalier. “Take it one step at a time, use the tools and resources that are available, and don’t forget to budget for entertainment. Remember, just because you are out of school it doesn’t mean you can’t have any fun.”