The countdown to college graduation is on. That means fun things like paychecks and never doing homework again. But it also means not-so-fun things like paying off student loans and creating a budget.
To help you tackle some of those adult responsibilities, we’ve come up with five money moves to do before graduation. Hello, real world.
1. Get to know your student loans
Assess loan repayment options and how they will affect your current budget, financial goals and the total cost of the loan. Aim to pay off your high-interest student loans first, which can accrue much more over the life of the loan than others.
Dean Obenauer, assistant director of financial aid for financial literacy at Creighton University in Omaha, Neb., recommends that students build loans into their post-graduate budget right away.
“I remind them right up front that the six-month grace period will fly by faster than they ever realize,” he says.
But before you wave goodbye to campus, don’t forget about a critical, free resource: your college’s financial aid office.
“Bills will come due no matter what and the objective of the financial aid office is to help students keep their finances together and to make sure their debt remains in good standing,” says Justin Draeger, president of the National Association of Student Financial Aid Administrators.
Thomas Bright, a 2011 philosophy graduate from Emory University in Atlanta, said he was ready when the bills came, even though he didn’t have a full-time job lined up.
“The funny thing is, after graduating college I didn’t have a real full-time job for almost eight months, but I didn’t do deferment or forbearance on my loans,” he says.
Instead, Bright — now a digital marketing strategist for ClearPoint Credit Counseling Solutions in Richmond, Va. — chose to live with his parents and cut out cable and more-expensive cell phone plans. He also worked various jobs, ranging from managing a fireworks stand to landscaping, tutoring and working the overnight shift for UPS.
Together, he and his wife were able to repay $40,000 in student loan debt since graduating.
2. Build your credit
If you plan to ever secure an apartment, buy a car, get a mortgage or finance another big purchase, you’ll need to have established some credit. You can find out your credit history for free once a year at each of the three major credit-reporting bureaus — Experian, Equifax and TransUnion — then pay a few bucks extra to get your score. You’ll then be able to get a better handle on how to improve your credit and what kind of credit cards you’ll qualify for.
Another great way to build credit is to make your student loan payments in full and on time. Not doing so can actually hurt your credit, even before you’ve opened your first card.
“We see a lot of people who will have a lower credit score than they should have, and sometimes it’s because they were in deferment after school and they didn’t talk to a lender,” says Aryea Aranoff, director of strategy at DRB’s Education Finance division, based in Darien, Connecticut. “That will hurt them for the next few years for anything they apply for.”
3. Plan for retirement — whether you want to or not
Retirement may seem too far away for you to care, but the more you save now, the more interest you may be able to earn. When you do land a job, try to save a percentage from each paycheck. You should also take advantage of any employer 401(k) match opportunities available.
“Saving for retirement when retirement is 40 years out is just mind-blowing to students and to young adults,” says Michelle Perry Higgins, a financial planner based in San Ramon, California, and author of “College Poor No More: 100 $avings Tips for College Students.”
“They’re like, ‘Are you kidding me? I can barely pay rent right now and you want me to put away 20% of my paycheck?’ But they absolutely need to do it,” she says.
4. Graduate your bank accounts
Your student checking and savings account may change when you graduate. Some accounts will have a grace period, whereas others will convert to regular accounts. Those new accounts might include a different fee structure, so be sure to check with your bank. If you’re planning to stay in a particular area, you could also look at credit unions, which offer low- or no-fee account options.
5. Create a post-college budget
Once you move past the “starving student” trope and head into a world that includes a double-digit salary, it can be easy to slip into bad spending patterns.
When you create your post-college budget, start with how much money you’ll be making, then take into account student loan payments, rent and bills, household expenses, retirement savings, emergency savings and, finally, entertainment.
Your budget can even incorporate goals, such as starting a business, buying a house, or getting married and having kids. That way, even if you’re not prepared for the real world, at least your finances will be.