Your personal financial planning after school differs greatly with your personal financial budgets while in college in many ways. In terms of income sources, while in school you might have been a beneficially of the student loan and financial support from your family, friends, scholarships or from your guardians. After completing your college education and getting a job, you start earning your own income which again has to be allocated to your increasing financial obligations.
Your expenses while in college used to be more on food, stationery and your hostel rent. However when you get out of college and start living on your own, your monthly grocery bills shoots up, while at the same time your monthly rent increases massively compared to what you used to pay while in college. All these new changes therefore call for a restructuring of your personal finance plans as you transition from college to the corporate world; and start earning your own income and budgeting for it independently. As it is the norm in personal finance planning, you will need to consider how your regular sources of income will change; and how your monthly expenditure will also change after college, and make preparations for a smooth transition.
In most cases, you will get out of college with a student loan that will need to be repaid on a monthly basis. If you calculate the loan repayments per month and add them to your obvious monthly grocery bills, rent, other utilities and expenditure on shopping; you will realize that your monthly expenses get inflated by a significant margin. Due to peer influence or out of genuine necessity, most millennials will also be in a hurry to buy a car immediately they get their first job. For others who are more ambitious, they will buy a house using a mortgage and start making the mortgage repayments on a monthly basis. All these costs pile up so fast and before you know it, you will be living from hand to mouth; waiting for end the month in order to pay bills and repay your loans including your credit card loan.
To avoid getting into the rat race, you will need to restructure your monthly budgets in a manner that will help you to minimize your costs and increase your savings and investments. The first thing to do is ensure you repay any loans you have first; so that you can release more funds to be deposited into your savings account and later on be used to fund your investments. Debt repayment should be prioritized by size and the credit period for each; whereby loans charging high interest rates and have short repayment periods are cleared first.
After your debts are cleared or have at least been reduced to manageable levels, you should allocate much of your income to savings; while cutting down on other monthly expenses. Developing the discipline of regularly depositing a given amount of cash into your savings account will help you to accumulate a huge pool of funds over time. You can then use the funds thus saved to invest through different channels based on your personal preference. Equities, bonds, mutual funds, unit trusts and other online trading channels are some of the options at your disposal when you want to start investing and trading on your money; in order to grow your wealth much faster.
Besides having a normal savings plan using your fixed deposit account, you will also need to have a personal retirement savings plan. This will help you to save more money for your retirement, up and above the statutory retirement plan that you have under your employer. Insurance coverage is very important too especially for your life, health, your car if you have one and for your house if you bought yourself one through a mortgage loan. Insurance coverage gives you the peace of mind that you need in order to concentrate on building your wealth while knowing that the major risks that can bring your life to its knees are taken care of by the insurance cover. In addition, you can use the life insurance as a savings plan, hence contributing further to your retirement kitty.
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Your ultimate goal after college is always to maximize your income and reduce your relative expenditure. By reducing your debt burden, saving and investing more, as well as ensuring you have a comprehensive insurance coverage you will be able to achieve the duo objectives in a synchronized manner; and at a much faster pace.