Summer is ending and this is our final article for recent graduates. Once you leave for school, the habits you practice will make a huge difference in the quality of your college life and the life that follows. We’ve been discussing the development of good habits and allocating funds to (1) expenses and to (2) savings. Now we can discuss what you should consider with the funds that are left over. In our example, we discussed having $150 of monthly income remaining after all the bills are paid. Rather than treat this as fun money, here are a few ways we can save some money for the next “rainy day” or a great fall trip.
Emergency Fund – Build up an emergency fund that can cover 3 – 6 months of all your expenses. Bad things, like your car dying, always seem to happen at the worst possible time. With careful planning, we can avoid a financial disaster if and when something does go wrong.
Funds for Future Events – It’s a great idea to plan ahead and setting money aside in “funds” are one way to save for known future expenditures. Repairs or a down payment for a car, holidays and birthdays, vacation, anything you might someday need money for should probably have income set aside and dedicated to it. Even if it’s just $20 a month set aside for something like Christmas, that’s $240 you don’t have to find elsewhere come holiday season.
Match employer contribution on your 401k – Many work places offer the opportunity to not only put some of your paycheck back for savings, but they might even match it with company funds up to a certain percentage. That’s free money! Make sure you’re taking advantage of it if possible and reap the benefits down the road.
Pay off debt – College tuition, car loans, credit cards, and debt in general can cause a lot of stress. You can use that extra money to make larger payments on debt and knock it down quickly and save money long term doing so.
Invest and Save – Already got all of the above knocked out? Consider looking into investments and talking to an investment adviser. There are a lot of options out there, from index bonds to IRAs and everything in between. Take a look sometime and see what you’re comfortable with.
Speaking of comfort, that’s really what we’re searching for in the end here. The ability to remove a lot of the stress that comes with making ends meet. A good plan can go a long way towards creating success with your budget.