Alright Grand Valley, we are a little over a week into the month of April and you know what that means: graduation is around the corner and with that comes new responsibilities.
One of the most important changes graduates will have to deal with moving forward is how to properly deal with money. Depending on your situation, you may have to pay back student loans while working only a part time job or you may be lucky and find your career job right off the bat.
Either way, you need to be ready to handle the financial challenges that will be coming your way.
With that said, the Internet is full of advice columns from different “experts” in the financial field so trying to decipher what’s smart and what’s not can be difficult. That’s where we at the Lanthorn come in.

PART 1

Daniel Shannahan is the assistant director in the Financial Aid Office and he said the first step is to fully understand the different aspects of a student’s loans.

“The first thing I would recommend that students do with regards to preparing to repay their student loans is to make sure they have a solid understanding of the types and amounts of loans they have borrowed,” Shannahan said. “Students can log in to the National Student Loan Data System at www.nslds.ed.gov to view their complete history of federal student loan borrowing.

“This will show students the complete list of federal loans they have borrowed, the current outstanding balances and interest rates for these loans, as well as the contact information for the student’s loan servicing agency.”

Shannahan also advised students to visit www.studentaid.gov to help view the different loan repayment plans.

“There are calculator tools on this site that allow students to enter their total loan amounts and see what their anticipated monthly payment amount and total repayment amount would be under the different repayment plans,” Shannahan said. “This site also has information on deferment and forbearance conditions that students may qualify for in certain situations.”

Understanding your student loans and knowing how to pay them back is vital moving forward but for graduates, finances are going to include more than just paying back student loans.

In an article in the U.S News & World Report by Kimberly Palmer, she talks about how many graduates fall victim to “rapid lifestyle inflation.”

“Instead of using your first paycheck to make your new digs look like a sitcom set, spread out your purchases over time,” Palmer said. “Maybe you need a bed right away, but that embroidered duvet cover from Pottery Barn can wait.”

Setting aside money each paycheck for your different purchases will help in the long run with the different purchases you will make but where else do students and graduates waste money?

Palmer mentioned that many graduates and even students spend money on something they could completely avoid, eating and drinking out.

Whether it is a daily lunch or a nightly drink out, those little purchases add up faster than you may think.

“Learn to cook, by enlisting the help of friends, family members, or your favorite celebrity chef (via the Food Network),” Palmer said. “The habit can save you hundreds, if not thousands, of dollars a year…”

PART 2

So you have started to cook your own food and are paying off your student loans – but what are you to do with the money you saved?

How about trying some simple investments?

“If saving money seems daunting, then start by funneling a modest two percent of your income into a high-yield saving account or money market fund,” Palmer said. “Then, slowly raise that percentage. Once you have your three-month emergency fund stored away, then consider investing a portion of your longer-term savings into low-fee index funds and other more aggressive investment vehicles.”

With the help of compound interest, students and graduates can better set themselves up for success down the line. How fast can compound interest add up you ask?

Kelly Kehoe of moneystreetsmart.com explained the idea of simple interest like this:

“There are two main types of interest: simple and compound,” Kehoe said. “As you may think, simple interest is really just that: simple. If you invest $1,000 at 5%, you will have $1,050 in one year. Over the course of ten years, the initial investment of $1,000 would be worth $1,500.”

For an example of compound interest, see the graph on the right.

By starting small and slowly building on your investment, you can retire much more comfortable than you may think.

Investing is a great money concept to understand but another thing to keep in mind is your credit.

SimpleTuition advised students to make sure they know their credit score after graduation so they can continue to build.

“Check your credit report regularly and order one free report every year by going online to annualcreditreport.com,” the website said. “Learn how to keep your personal and financial information in check and avoid inaccuracies in your report.”

But what if you check your report and it is not where you want it to be?

Now is the time to get that credit score back where it belongs since it will be with you the rest of your life.

“Things like paying rent on time, paying your car payment on time and even having a few credit cards can all result in good credit history,” SimpleTuition said. “As good as those things are, just missing a single payment can be a black eye on your credit history for up to seven years.”

Now, I know this all seems overwhelming and confusing but Grand Valley is here to help.

“I would also refer students to www.gvsu.edu/moneysmart, which is the website for MoneySmart Lakers, a financial literacy program designed to help GVSU students understand their finances and develop money management skills,” Shannahan said. “The MoneySmart Lakers page contains information and resources on a variety of topics that students can encounter on a daily basis, and I think students can really benefit from it.”
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SIDEBAR:

Approximate Percentage of Monthly Income
Housing: 23-33%
Life and Car Insurance: 4-6%
Food: 12-20%
Transportation: 7-10%
Personal Debt Repayment: 8-18%
Entertainment and Recreation: 4-6%
Clothing: 4-7%
Savings: 5-10%
Medical: 3-5%

Information provided by SimpleTuition