Graduating from college is an exciting time, but it can also be overwhelming, especially when it comes to finances. Students are preparing for several big financial milestones before they graduate, including getting a higher-salaried job, building credit and taking on more financial independence.

But college students also have the burden of student debt looming — a Bankrate study found that about 60 percent of U.S. adults have delayed financial milestones due to that debt.

Here are six tips college students can use to prepare for life after graduation and avoid financial pitfalls.

1. Make a plan for student loans

Before you leave college, it’s important to understand your student loan situation, including:

  • How much you owe
  • Student loan interest rates
  • Repayment terms
  • When payments are due

Student loan debt is one of the biggest financial challenges for graduates, making up the second-largest form of consumer debt. For that reason, it’s important to develop a plan for paying it off as soon as possible.

“Just because there are no payments due for up to six months after graduation, this does not mean you should wait to plan,” says Patrick Logue, CFP, CSLP, owner of Prudent Financial Planning in Naples, Florida.

The first thing you can do is make a table of all your loans, with the amount, interest rate and lender for each. Then, research your repayment options and choose the one that best fits your financial situation.

As of this writing, federal student loan payments are paused until at least August 30, 2023. Make sure to keep track of federal student loan news to see if any of your debt will be forgiven or if you need to prepare to begin making payments.

Private loans may have more limited repayment options, so read the terms of these loans carefully. It’s important to pay back your loans on time to avoid additional fees and interest.

2. Create a budget

Making a budget is crucial to avoid overspending and unnecessary debt and build your savings. As you take on more financial responsibilities — and develop a strategy to pay off debt — your budget will help you track all of these expenses and feel less overwhelmed. It will give you a clear picture of how much you can reasonably spend each month on what.

The specific categories in your budget will depend on what expenses you have and can include things like rent, food, going out and monthly student loan repayments. Generally, your budget should be made up of three categories: needs (like rent), wants (like streaming subscriptions) and savings. Experts often recommend a budgeting rule in which 50 percent of your post-tax income goes to needs, 30 percent to wants and 20 percent to savings.

There are many free budgeting tools and apps available that can help you track your spending and set financial goals. It’s important to regularly review your budget to ensure you’re living within your means and making adjustments as necessary.

3. Build credit

Building good credit is key to future financial success. Start by obtaining a credit card or secured credit card and using it responsibly, by making payments on time and keeping your debt balance relatively low. Not only will this help you avoid fees and high interest costs, it also contributes to building a good credit score, which can help you secure loans and better interest rates on future borrowing.

You can also consider becoming an authorized user on a family member’s credit card or taking out a small personal loan to build credit. Student loan repayment contributes to good credit, too, as long as you make all your payments on time. Missing a deadline, on the other hand, can deal a negative blow to your credit score.

Remember that building credit takes time, especially when you’re basically starting from scratch. so be patient and consistent, regularly meeting payment deadlines and using your card without overspending.

4. Plan for retirement

Although retirement seems far away, it’s never too early to start planning for it. You’ll likely want to open a 401(k) or an Individual Retirement Account (IRA) and contribute a portion of your income to the account each month.

“Contributing to your retirement plan such as a 401(k) or other will not only help you save for retirement but can also help reduce your tax liability in the current year,” says Logue of Prudent Financial Planning. A retirement account allows you to grow your wealth tax-free or tax-deferred and gives you tax breaks.

Many employers offer a 401(k) retirement plan or similar depending on the type of work and may match your contributions up to a certain percentage. If your employer doesn’t offer a retirement plan, you can open an IRA with a financial institution.

The earlier you start saving for retirement, the more time your money has to grow and the better prepared you’ll be for retirement.

5. Understand the fees on your financial accounts

While in college, you may have had a student bank account that didn’t charge any fees. As you transition into a standard bank account, it’s important to be cautious of monthly maintenance fees, overdraft fees and other charges that you might not have incurred before.

The average monthly fee for a noninterest checking account is $5.44, according to Bankrate’s checking account survey. Often, you can get the monthly fee waived by maintaining a certain balance, setting up direct deposit or using online banking services.

But you can also avoid monthly fees altogether by opening a fee-free checking account. The Bankrate survey found that 46 percent of noninterest checking accounts are free.

Other fees, like overdraft fees, can also be avoided by keeping tabs on your account balance or looking for an account that doesn’t charge them. Many banks have reduced or eliminated overdraft fees. Research top bank accounts and read the terms of the accounts to understand what fees are associated with them.

6. Save for emergencies

Unexpected expenses can occur at any time, which is why having an emergency fund is essential. Aim to save at least three to six months’ worth of expenses in an easily accessible savings account. That way, you’ll have back-up funds to help cover costs like emergency car repairs, medical bills or a sudden job loss.

One tip to help build your emergency fund is setting up automatic transfers from your checking account to savings each month. Saving even a little bit each week or month can add up over time. Start by setting up transfers of $25 or $50, and gradually increase the amount as you become more comfortable with saving.

It’s also important to find the right savings account to store your emergency fund in. You’ll want an account that’s accessible and low risk. High-yield savings accounts or money market accounts might be the most suitable.

Bottom line

Financial management after college can be daunting, especially as your financial goals and responsibilities become more complex. But with the right tools and strategies, you can set yourself up for a successful post-college financial life. Make sure you understand what expenses you’re taking on — such as student debt repayments, rent and utility bills — and keep them organized in a budget. As you develop more financial experience and good savings habits, you’ll be able to save more and continue achieving life goals.