Money expert Steven. M Hughes shares tips to help college graduates improve their finances.
Columbia, SC – Walking across the stage is a huge accomplishment for many college graduates, however many of them are walking into debt. According to Student Loan Hero, graduates are entering the working world burdened by the most student loan to debt, on average $39,400.
The Department of Education says two in five student loan borrowers have a high chance of defaulting in the next five years.
Money expert Steven Hughes from Know Money Inc. has four tips to help college grads entering the working world improve their financial position:
- Knock out your high-interest debt- While you may have a 6 month grace period before repaying your federal Stafford loan and some private loans, credit card and personal loan debt is still growing with double-digit interest rates. Use the debt snowball and create a plan to get rid of all or most of your debt that has interest rates over 7%.
Buy a house, but not that house- Most Americans spend 30-50% of their income on their housing, but this doesn’t have to be your reality. College graduates who make plans to move out of an apartment or house they shared with roommates, will likely see their housing expenses increase.
- Set yourself up to live in your next house at low or no cost by purchasing a duplex, triplex, or quadplex. This way you can live in one unit with roommates and rent out the others.
- Not interested in making that type of money while managing other residents? Purchase a house and rent out your spare bedrooms to roommates.
- Build your savings muscle- You’re going to have an inkling to “celebrate” your new income and play as hard as you work. Write down your expenses and your income and determine how much you’ll save from each check. Automate this amount or percentage. Next, write down your spending plan and cut your expenses down as low as comfortably possible. Stack the difference as your emergency savings account, especially if you’re interested in becoming a homeowner in the near future.
- Create your personal financial foundation first- As you’re building your financial foundation by reducing your debt and increasing your savings, remember that you may not be able to immediately help your family by loaning/giving them money in the near future. Right now, you need to focus on your personal financial picture. While its hard to say no to family and friends, you’re putting yourself in the position to help as many people as you’d like, if you’re disciplined now.