Graduating College:

Tips for Improving Financial Literacy and Creating Your First Financial Plan

Congratulations on reaching a significant milestone—graduating from college! As you step into the next phase of your life, it’s essential to equip yourself with the financial knowledge and skills needed to navigate your newfound independence. At IC Credit Union, we’re committed to helping you build a solid foundation for your financial future. Here’s a guide to improving your financial literacy and creating a financial plan as you transition from college to the working world.

Why Financial Literacy Matters After College

Financial literacy is the ability to understand and effectively manage your personal finances. After college, you’ll be making important financial decisions, such as paying off student loans, budgeting for living expenses, and saving for future goals. The more financially literate you are, the better equipped you’ll be to make informed decisions that set you up for long-term success.

Tips for Improving Financial Literacy

1. Educate Yourself: Take the time to learn about personal finance topics such as budgeting, credit management, investing, and retirement planning. There are many resources available, including books, online courses, podcasts, and financial blogs. Start with basics like understanding how credit works, the importance of saving, and the impact of interest rates on loans and credit cards.
2. Attend Financial Workshops: Leverage technology to track your spending, set financial goals, and manage your money. There are numerous budgeting apps and financial tools designed to help you stay on top of your finances and make informed decisions.
3. Use Financial Tools and Apps: Leverage technology to track your spending, set financial goals, and manage your money. There are numerous budgeting apps and financial tools designed to help you stay on top of your finances and make informed decisions.
4. Seek Advice from Financial Experts: Don’t be afraid to ask for help. Financial advisors, especially those available through your credit union, can offer personalized guidance on managing your money, setting goals, and making smart financial decisions.
5. Join Financial Literacy Programs: Some employers offer financial literacy programs as part of their benefits package. Take advantage of these programs to improve your financial knowledge and gain insights into topics like retirement planning and investment options.

2. Creating a Financial Plan After College

Creating a financial plan is one of the most important steps you can take as you enter adulthood. A well-thought-out plan will help you manage your income, pay off debt, save for the future, and achieve your financial goals.

1. Assess Your Current Financial Situation: Start by taking stock of your finances. List all your sources of income, such as your salary from a new job or side gigs, and your fixed expenses, including rent, utilities, groceries, and transportation. Don’t forget to include any outstanding debts, such as student loans or credit card balances.
2. Create a Budget: A budget is a crucial tool for managing your finances. It helps you ensure that you’re living within your means and prioritizing your financial goals. Use the 50/30/20 rule as a guideline:
   • 50% for Needs: Allocate half of your income to essential expenses, such as rent, utilities, groceries, and transportation.
   • 30% for Wants: Use 30% for discretionary spending, like dining out, entertainment, and hobbies.
   • 20% for Savings: Dedicate 20% of your income to savings and paying off debt. This includes building an emergency fund, contributing to retirement accounts, and making extra payments on student loans or credit card debt.
3. Build An Emergency Fund: An emergency fund is a savings buffer that can cover unexpected expenses, such as medical bills or car repairs. Aim to save at least three to six months’ worth of living expenses in a separate, easily accessible savings account. Start small, setting aside a portion of each paycheck until you reach your goal.
4. Manage and Repay Student Loans: For many recent graduates, student loan repayment is a top priority. Familiarize yourself with your loan terms, including the interest rates and repayment options available. Consider setting up automatic payments to avoid missing due dates, and explore options like income-driven repayment plans or refinancing if you’re struggling to make payments.
5. Start Saving for Retirement: It’s never too early to start saving for retirement. If your employer offers a 401(k) plan, contribute enough to take advantage of any employer match—it’s essentially free money. If a 401(k) isn’t available, consider opening an Individual Retirement Account (IRA). Even small contributions can grow significantly over time thanks to compound interest.
6. Build Credit Responsibly: Establishing good credit is essential for future financial opportunities, such as buying a car or home. Use credit cards wisely by charging only what you can afford to pay off each month. Pay your bills on time, and avoid carrying a balance to prevent interest charges from piling up.
7. Set Short- and Long-Term Goals: Identify your financial goals and categorize them as short-term (within the next year) or long-term (several years down the road). Short-term goals might include saving for a vacation or paying off a credit card, while long-term goals could involve buying a home or starting a business. Setting clear goals will give you a sense of direction and motivation to stick to your financial plan.

Conclusion

Graduating from college is an exciting time filled with new opportunities and responsibilities. By improving your financial literacy and creating a solid financial plan, you’ll be well-prepared to tackle the challenges of adulthood and build a secure financial future. At IC Credit Union, we’re here to support you every step of the way with resources, guidance, and financial products tailored to your needs.

Stay tuned for more articles in our financial literacy series, where we’ll explore financial planning tips for different life stages. If you have any questions or need assistance with your financial plan, don’t hesitate to reach out—we’re here to help you succeed!