What should all recent college graduates know about personal finance? originally appeared on Quora - the place to gain and share knowledge, empowering people to learn from others and better understand the world.
This might sound counter intuitive, but the most important thing to know about personal finance as a recent graduate, is developing skills and experience that will help you make money. Unfortunately, many degrees leave college grads empty handed with bleak starting wages and few great entry level job opportunities. I thought studying economics would help me land a high paying job right out of school, but instead I couldn’t even line up an interview at the bottom of the recession in 2009. Focus on acquiring in-demand skills that employers need and that set you apart from others fresh grads in the workforce. It’s not easy, but rather necessary.
I mention income first because while there are a lot of important personal finance strategies, most rely on income. You can have all the personal finance knowledge in the world, but without a solid income you’re dead in the water.
In addition to your day job, build extra income sources. Finding a side hustle can be a great way to increase what you make.
After that, the next thing I’d say is how to handle their student debt. I did all the wrong things here: I ignored my debt, let loans slip into default, and saw my debt balloon due to penalties and interest from $74,000 to $107,000.
This was all because I took a passive approach to my student loans rather than an active one. So grads should really tackle their debt head on rather than waiting for a miracle.
To do this, figure out how much debt you’re in and what your monthly payments will be (if you don’t already know these things). Then, look into options to manage student debt, even before you need them — things like income-driven repayment plans or student loan refinancing. This will help you get past financial setbacks (which everyone has at some point) without making major student debt mistakes.
Beyond that, everyone should have an understanding of budgeting. You should know how to track your expenses, check your account balances, figure out your cash flow, and net worth. Along with that is a spending plan — making a strategy for how to best spend your dollars, build a three to six month emergency fund, save for your future, and get out of debt.
Lastly, keep learning about money and personal finance — because when you know better, doing better comes naturally. These personal finance books are a perfect starting point for a new graduate.
This question originally appeared on Quora - the place to gain and share knowledge, empowering people to learn from others and better understand the world. You can follow Quora on Twitter, Facebook, and Google+. More questions:
- Personal Finance: What kind of "side hustle" works best for students who are trying to pay down debt?
- Student Loans and Debt: What happens when a student with high debt loan dies?
- The College and University Experience: What advice wound you give to graduates that worry about paying off their student loans?