Budgeting For Recent College Graduates

By: Jon Ross

Now that you've earned your college degree and paid your last tuition bill, your transition into adulthood is complete. It's time to learn how to be smart about your income and avoid costly mistakes. The first thing you need to do is set a monthly budget so that your paycheck doesn't seem like fun money. List everything you need to pay every month and what's left is disposable income. If there's none left, it's time to go back and make some cuts in your spending. Here's what else you need to know:

1. Never pay bills after the due date. There are fees and interest charges attached to balances when you miss your due date by even a couple days. What's more, your almighty credit report could take a hit as well. If you're not sure why a respectable credit rating is important, try getting a car loan or a lease on an apartment without one. If your credit score is good, you'll likely see better rates for car insurance and loans, too.

2. Keep your credit card use to a minimum. It is a good idea to accept at least one credit card offer, as long as there's no annual fee and the interest rate is competitive. Why? You can use it for online purchases and in the case of emergencies or big-ticket items. Do not let yourself take more than a couple months to pay the balance in full however. It won't take long before the interest charges snowball and you find yourself in over your head. To continue to build a good credit score, consider using a credit card every month to pay for small things like groceries and pay the balance in full every month.

3. Force yourself to save from the very beginning of your earning life. If you're not prepared for little emergencies, how will you pay for a blown tire or a trip home to visit a sick relative? That's when credit card usage usually comes into play and we just discussed the negatives involved. If you find it too difficult to find a little extra money to save out of every paycheck, ask your employer about a company savings plan that takes your contribution out before you get your check. The best part is that usually the employer makes a contribution as well.

4. Keep your eye on your checking account balance. The biggest culprit in overdrawn accounts is the debit card. Don't confuse it with a credit card - the money comes directly out of your checking account. If you don't keep a log of what you've spent with your debit card you might find that you've spend more than you have. The result is nasty overdraft fees that multiply with every single usage. Imagine a drive-through burger ending up costing you over $40 by the time you add the fee.

While you may learn the hard way as you transition from college student to a member of the adult working world, keep doing your best to be financial responsible. It's a very rewarding habit to get into.

Article Source: http://yourfinance.co.za