Thousands of people all over the world will graduate from college this month. It’s a really exciting time.
But for many, it’s also a very scary time.
This is when lots of college students will start to get a taste of life outside of their parent’s protection.
And let’s be honest.
Life is pretty freaking tough.
No one said it was easy, and only being out of college for 1 year, I can tell you, it’s not. It’s difficult to get moving in the right direction after college.
Heck, just moving in any direction at all seems like a challenge.
There’s so much to think about when it comes to life and finances. What do you do with your money? Do you try and attack that massive pile of debt that you’re carrying around on your shoulders?
Or what about contributing to this 401K thing at work that you don’t know anything about?
And then there’s saving for a house, a new car, and paying credit card bills. Not to mention now you can’t rely on the campus meal plan anymore so you’ve gotta start buying ALL the groceries.
And what about all the traveling you planned to do after school? How in the world are you going to pay for that?
At some point or another, it starts to pile on faster and faster and you can begin to feel crushed with no good idea of where to start.
And that’s okay.
This is a process.
You didn’t get your degree overnight, and you’re not going to become a money genius overnight either.
But if you’re lost and trying to figure out what to do after college, here’s 4 steps to get you started.
Step 1: Get Organized
This step may seem obvious, but it’s the one most graduates skip right over.
It’s extremely important to get a grip on your entire financial situation and figure out where you stand. If you don’t even know what the situation is, how in the world can you change it?
If you haven’t already, it’s time to get a budget/finance software that lets you see all of your money in one place.
You need to be able to see all credit cards, checking accounts, savings accounts, student loans, car loans, retirement accounts, and any other financial accounts all in one place. This will help you see where the money is at and then you can start to make plans on what to do with it.
Step 2: Get Super Clear On Your Goals and Wants
This is a not-so-obvious step that most graduates again leave out. After you get all of your accounts in one place and you can see how much money you have and how much you owe, you need to think about your goals.
It’s very important for you to think about what your goals actually are and what you actually want out of life.
Are you wanting to buy a house and settle down? Are you wanting to travel for a bit? Do you want to move to a big city or live out in the rural country? What sort of jobs are you looking for and what lifestyle are you hoping to eventually have?
Before you can focus on investing, building credit, paying off loans, or saving, you need to first figure out what you want. It’s nearly impossible to be successful managing money if you’re not clear on why you’re doing what you’re doing.
For many of you, you’re single with no kids and have the entire world open for you to attack with nothing to hold you back. And even for those who are married (like me), remember, your 20s are a time in your life where you’ll have so much more energy to go after your goals than you ever will again.
This is the time to take advantage of your youth and not just enjoy being young, but work your tail off and set yourself up for success throughout the rest of your life.
That might mean working a ton and saving money like crazy. Or it might mean starting your own business. Maybe it just means paying your debt off as fast as possible so that you can afford to travel.
Whatever it is for you, that’s great, just be sure to figure it out.
Spend some time thinking about what major things you want to accomplish this year, in the next 5 years, and the next 10 years.
Write each of these down and put this paper in a place you’ll see every day.
These goals will help you decide how to attack your money and in what order: whether that’s house saving, credit building, retirement investing, or rapid debt repayment.
Step 3: Make A Plan
Now it’s time to take those goals and make them a reality.
Create a plan that is unique to you and helps you reach your goals.
More than likely, this includes a budget of some kind.
Remember, budget isn’t a bad word and it doesn’t tie you down. A budget is just making a plan for how you want to spend your money before you actually spend it.
If you want your dreams to come true and live where you want, travel where you want, and work where you want, you’re going to have to budget.
You’re going to have to make a plan for your money.
To get started just choose a really simple budget that’s based on your goals from Step 2.
Then follow this process:
- Choose your main goal (or goals) and figure out how much money you need to set aside each month to save for it
- Subtract that amount from your monthly income
- Pay other required bills with the left-over money (rent, utilities, debt etc…)
- Use the rest of your money as you please for food, fun, and shopping (assuming you’re on track with your goals)
As an example: If you’re a young 20-something fresh out of college you might just have 3 main goals:
- Pay off student loans
- Save a little through company retirement plan
- Go on a backpacking trip through Europe
Let’s say you want to pay off your student loans in 5 years, save 10% of your income in the company retirement account, and plan your backpacking trip for next summer (1 year away).
You could figure out each of those and save all of that money in separate accounts at the very beginning of your paycheck. Then use the left-over money to pay your bills next. And lastly, use the rest of your paycheck for everything else.
You may find that you don’t have enough money to focus on all three goals right now. And that’s okay.
Actually, that’s probably very normal.
That’s when you’ll go back to step number 2 and really focus on what goals are the most important.
It’s an iterative process going back and forth and back and forth. Don’t expect to get all the numbers worked out on the first try.
Just keep at it, and you’ll find a plan that will work.
The bottom line is that while defining your goals is great, you’ll never reach them without a solid plan. So spend some time refining your plan and your goals to fit it.
Step 4: Get an Accountability Partner
Now, this process sounds easy and great on paper, but it’s pretty stinking tough.
Lots of graduates are still single and are jumping into new careers in new cities, often alone.
It can be very hard to focus on paying down college debt or saving for the long term when you’re trying to do it by yourself.
Especially when you’re trying to save but all of your friends and co-workers are hitting the bars every weekend. Those drinks really pack a punch to your wallet.
This is when you’ve got to remember to stay focused on why you’re doing what you’re doing. This is why you’ve got to keep those goals in mind at all times.
And this will be exponentially easier if you’ve got someone in your life that will help you stay on track.
After figuring out your goals and creating a budget that helps you work towards them, find a friend, sibling, spouse, parent, or co-worker who you can count on to talk to about money.
Talk to them at least 2 times per month and have them ask you how you’re doing on your financial goals.
Doing this will help keep you honest and on track to actually hit your goals.
I know people don’t like talking about money and that it can be super awkward. But if you want to not look back when you’re 30 and regret all the time you wasted after college, I highly suggest getting someone to help you.
We’re all human and we all mess up. But we are so much more likely to succeed when we work together.
So find someone you trust ask them to hold you accountable. It will be so worth it in the end.