You’ve graduated from college. Congrats! Leaving school entails plenty of excitement ahead—but what about your finances? Read on for three tips to get your post-grad finances in great shape.
Tip #1: Start Building an Emergency Fund
Now that you’re out of college and likely looking to transition into a job and a more independent housing situation, it’s time to start building an emergency fund.
An emergency fund refers to a savings account reserved for unplanned financial situations—such as medical bills, car repairs, or unexpectedly losing a source of income. Experts recommend building an emergency fund that can cover three to six months of expenses. Most importantly, don’t tap into your emergency fund unless it truly is an emergency!
Recent college grads starting their first emergency fund might consider a high-yield savings account, which typically offers a higher-than-average interest rate while still keeping money accessible. To get started, set a specific goal for savings and decide how much money to put into your emergency account every month. Plan to increase this amount when you can afford to do so.
Tip #2: Refinance or Consolidate Student Loans
Refinancing a loan refers to the process of moving your current loan debt to a new loan, with different terms and a new interest rate. Many people refinance their student loans in order to take advantage of a better interest rate. On the other hand, it’s also possible to change the length of the loan during the refinancing process, in order to get a lower monthly payment.
Loan consolidation means bundling multiple loans into one monthly bill, so payments are less hassle and less likely to be forgotten. When consolidating loans through the federal government, you can sometimes get a lower interest rate depending on the weighted average rate of your existing loans.
To learn more about student loan refinancing, check out refinancing and consolidation options from Harvard FCU. You can find your rate and apply online, or simply get a little more information about what loans are eligible for refinancing and how the process works.
Tip #3: Boost Your Credit Score
A credit score is a three-digit number which represents your credit risk. Lenders, credit card companies, landlords and even some employers look at your credit score to determine your trustworthiness, financial management, and ability to pay bills on time.
What is your credit score? You should be able to find this number on your credit card statement or loan statement. You can also receive a free copy of your credit report every twelve months from a nationwide credit bureau, by visiting www.annualcreditreport.com.
In general, 670 and above is considered a good credit score. If your credit score is lower than this, you may have trouble getting the right loan or credit card. Importantly, having a good credit score means you will get a better interest rate and better terms on any borrowing agreement—so improving your credit score can save you a lot of money in the long run.
As a recent college grad, you can build up your credit score by paying bills on time, putting utilities in your name, and paying off debt. If you don’t yet have a credit card, getting a card is usually a smart way to boost your credit score. Look for a credit card that offers great rates and simple terms. Of course, keep in mind that accruing more debt will damage your credit score, so aim to pay off your balance every month
Interested in learning more? Check out the Harvard FCU blog for more tips on building your credit score from scratch.