You’ve probably looked at your phone before and thought, “It’s time for an upgrade.” So you trade in your old, outdated model for the newest one with all the enhanced features.
You can take a similar approach with your finances after you graduate. The good news is that instead of costing you money, like that new iPhone might, these financial upgrades can save you money.
Here are four new moves that can improve your postgraduate finances:
1. Continually refine your budget
If you put together your budget more than a few months ago, it’s probably time to re-evaluate.
“Things inevitably change — our goals change, our lives change,” says Lynne Somerman, a budget and money coach in Portland, Maine.
Figure out what has changed since then. Did you get a new job? Did you move to another state? Did you pay off your credit card debt? Did you have a child?
Somerman suggests reviewing your past spending habits to figure out where your money is going and compare that against your values and goals. Then you can decide on re-evaluating your spending habits. It helps to think beyond monthly expenses. Include things that don’t happen on a monthly basis, like a semiannual membership, and estimate expected spending, such as for that end-of-year vacation.
“The first time you pay a big bill without having to scramble for money — it feels amazing, you feel like the king of the world,” Somerman says.
2. Plan for life after your career
If you haven’t started saving for retirement, today’s your day. If you have already started contributing to a retirement account, consider kicking it into full gear.
Most financial planners recommend saving about 15% of your annual income to meet that goal. But, according to a new NerdWallet analysis, millennials may have to save as much as 22% to stay on that path.
Early in your career, saving 15%, and certainly 22%, may not be realistic with your budget. However, start contributing some money to a 401(k) account — at least enough to take advantage of your company’s 401(k) match if it offers one because that’s free money. Then ramp up your contributions with each pay raise. If you don’t have access to a 401(k), look into getting a Roth IRA.
At this point in your life, though, it’s important to create a balanced financial plan that addresses all your priorities.
“The plan doesn’t necessarily have to be solely for retirement,” says Justin Castelli, a certified financial planner based in Fishers, Indiana, and the founder of RL Wealth Management. “It’s possible to do both [long- and short-term goals], but you have to have a plan.”
3. Put your finances on autopilot
Your various financial accounts likely will have the option to set up automatic payments of bills. After making sure you have an up-to-date budget and a reliable source of income, sign up for auto-pay. Castelli says it will help you take the guesswork out of how much disposable income you really have. And you’ll be able to get creative with your payment methods.
“That allows people to do things like pay their bills with credit cards and get points for that without going into credit card debt,” says Somerman. “Trust those numbers and use them; then you don’t have to worry about what day everything is due and just use everything automatically.”
This trick can work with paying off student loans, too. It also can save money because many servicers, including those for federal and private loans, reduce the interest rate by 0.25% when you sign up for automatic bill pay.
4. Consider refinancing your student loans
If you’re not happy with your interest rates, consider student loan refinancing. If you meet the typical qualifications, such as solid credit and a steady income, you could get lower rates. If your rates are above 6%, refinancing can pare down interest payments.
But before you submit your application, weigh the pros and cons of refinancing carefully. Most people may not want to refinance any federal loans because they would lose borrower protections such as income-driven repayment plans. But if you took out a federal loan when rates were 6.8% and you’re confident that you won’t need those protections in the future, then refinancing is worth a look.
Check out NerdWallet’s refinancing calculator to see how much money you could save.