Goodbye, homework. Hello, household budget. College graduates around the country are transitioning from life on campus to life on their own. While being in college introduces many financial experiences to young adults — from paying bills to handling debt — graduates are about to receive a crash course in student loans and retirement savings.
Where to start? Ask yourself the following questions:
Are you insured? I know. Protecting yourself from life’s ills is not really on the list of top priorities for 20-somethings. But at least it’s easier than it used to be. The health care reform act allows young adults to have health insurance through a parent’s policy until their 26th birthday. Parents should contact their employer for specifics.
If you don’t have access to a parent’s policy, consider purchasing at least a catastrophic policy that protects you in case you get hit by that proverbial bus. To understand your options, visit Healthcare.gov, a surprisingly easy-to-digest site, and click on “young adults.”
In addition to health insurance, strongly consider renters insurance and long-term disability insurance.
Are you employed? If you answered yes, then get real about your paycheck. Compared with what you’ve been earning at your work-study job, your new salary probably looks huge. But don’t be fooled, said Laura Dierke, at Thrivent Financial for Lutherans. “After taxes, benefits, living expenses and student loan payments, your remaining spending money could amount to less than half of your gross income,” she said.
Also, make sure to sign up for your 401(k) retirement plan through work and put at least enough money in to receive the company match (if there is one).
Where does your money go? Megan Luebke, a 2009 graduate of Concordia College in Moorhead, Minn., has learned that budgeting her entire paycheck is the only way to ensure she doesn’t eat out too much with friends. She’s strict with her spending because she wants to pay off her $32,000 in student debt as quickly as possible. Luebke has about a dozen categories she tracks on paper. But you can track your spending online with many banks. Or you can sign up for mint.com, a free service that tracks your spending for you and can be accessed via your smartphone.
When is your student loan payment due? Hopefully you learned this during your college’s financial aid exit counseling. Generally, you have six months after you leave school before you must start repaying your loans, which gives you some time to figure out how to cover the bill.
Under a standard repayment plan, you should be done paying in a decade. Other options, such as the income-based repayment plan, can ease the burden of high monthly payments, but will stretch out your repayment period.