1. Pay Down Student Loan Debt
If you're a recent college graduate, it's time to start thinking about repaying your student loans. Using some of your graduation money to reduce your loan balance could save hundreds of dollars in interest charges. It could even shave several years off your repayment schedule.
Ridding yourself of this debt lets you redirect your income to other goals sooner, such as saving for a down payment on a car. But, before making an extra payment on your student loans, it's essential that you contact the loan servicer to make sure the funds will be applied to the principal balance rather than future payments.
2. Invest in Postsecondary Education
If you've recently graduated from high school, consider using some of your graduation money to further your education. These funds could go toward earning a certificate, license, college degree, or taking a class or workshop to develop new skills or improve existing ones. Pursuing education after high school could make you more appealing to potential employers or clients, leading to better job prospects, higher pay, and greater job stability.
Research programs or courses that align with your interests and career goals. Compare costs, training duration, and potential outcomes, such as job placement rates or the ability to transfer credits to a degree program.
3. Eliminate Debt
As a recent graduate, you can improve your financial situation by eliminating or reducing your credit card and personal loan debt. By doing so, you’ll be able to save money, invest in your future, and build wealth. Plus, becoming debt-free can reduce stress and anxiety, providing you peace of mind.
There are two popular debt elimination strategies: snowball and avalanche. Experience quick wins by selecting the snowball method. Start by focusing on eliminating the smallest debt first. Once it’s paid in full, move on to your next smallest debt.
Or, opt for the avalanche strategy which focuses on paying off the debt with the highest interest rate first before moving on to the next highest interest rate debt. This method can help save money on interest charges.
4. Build an Emergency Fund
Use part of your graduation money to start building an emergency fund so you'll be better equipped to deal with unexpected financial challenges that may arise. Financial experts often recommend saving three to six months worth of living expenses in a designated savings account. This figure is calculated by adding up your monthly expenses — including rent, utilities, groceries, transportation, and other essential costs — and multiplying that by the number of months you want to have covered.
For example, if your monthly expenses are $2,000, you would aim to save between $6,000 and $12,000 in a separate account to be used only for emergencies.
5. Treat Yourself
A controlled splurge should be part of your spending plan. As you work toward other long-term goals, such as saving for a down payment on a new car, making a habit of allowing yourself small rewards at set intervals can help you stay motivated and remind you of how far you’ve come. So, treat yourself to a massage or a night out, but remember to set a spending limit so you'll have funds left over for other financial goals.
Your graduation money could lay the foundation for a secure financial future. By making thoughtful decisions and planning ahead, you can set yourself up for success and live the lifestyle of your dreams. Discuss your options with a trusted Financial Coach at HawaiiUSA.
