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Graduating from college, embarking on a professional career, getting married, starting a family, understanding financial planning — college grads certainly have a lot on their plates. With all of these significant life changes packed into a short time span, it can be difficult to determine just how to prioritize your financial goals.
Even though individual life circumstances can be vastly different for everyone, every recent graduate should make a genuine effort to learn about setting up a budget, and even consider budgeting tools that might help them stay on track. Here are three financial strategies everyone hoping to achieve financial independence should employ.
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Pay Off Student LoansStudent loans can be a big burden and might even sidetrack you from accomplishing other important life goals. According to the Center for Financial Services Innovation, “In 2019, nearly 70 percent of college graduates in the United States can expect to leave school with more than $30,000 in student debt.” That’s a pretty significant debt, and can be crippling, even to the point of deterring people from pursuing life goals like marriage, homeownership, and starting a family. This is why it is imperative to work toward paying off student loans as quickly as possible.
To pay off your student loans faster, make sure you make more than the required minimum payment every month and that your extra payment amount is being put toward the principal balance, not toward future payments as a “credit.” By paying off extra principal each month, you’ll not only reduce the length of time you have to pay off your loan, you’ll also reduce the amount of interest you pay over the life of the loan.
You might also consider applying any financial windfalls or gifts to your student loans. For example, if you get a raise at work, apply the extra money to your student loan payments instead of using it to get a nicer apartment or car, which leads us to the next goal — saving.
Start Saving NowAfter graduating from college and landing a career-oriented job, it can be tempting to put all of your new-found money toward fun activities or shopping sprees, but the wiser thing to do is to start saving money instead. Whether it’s for an emergency fund, or just a general savings account, this extra money can give you a cushion and help lead you toward financial independence.
Saving money might not sound like fun when compared to the lifestyle inflations mentioned previously, but when you can apply saved money toward another life goal, like buying a house, getting married, or starting a family, you’ll be glad you started saving when you did.
Use Credit WiselyAs much as your student loans feel like a burden, they are a lot more practical and manageable than credit card debt. Credit card debt usually comes with very high interest rates, sometimes over 20%, which can make large balances difficult to pay off. But credit, used wisely, is a tool you can use to improve your financial health. If you use credit cards in a smart way, like to earn rewards for travel or cash back, and remember to pay off your balance in full each month, you’ll earn a strong credit score and improve your likelihood of qualifying for a loan when you need one.
Focus on Financial IndependenceUltimately, no matter what your individual life goals are, if you can manage to get out of debt, stay out of debt, and save a little money every month, you’ll be able to work toward your life goals and hopefully reach financial independence sooner rather than later.