by Christina Pomoni

Created on: December 07, 2011

Dealing with financial issues is always stressful. Especially, if you are a new college graduate, you need to take really careful steps to build a solid financial future. Probably, upon graduation, you are already carrying a student loan debt. Your goal is to find ways to budget your money efficiently and to make your money grow in order to guarantee more safety in the years to come until retirement.

The following are great money tips for new college grads.

1. Start saving money immediately

The most important realization as a college grad is that time is on your side. When you are in your 20s you have plenty of time to start saving money and reap the benefits of your savings later in your life. The earlier you start saving, the better and the more solid the foundation you set for a stable financial future. The idea is that by start saving in your 20s, you allow your money almost 45 years to compound until retirement, while if you start saving in your 40s or 50s, your money will have ten or twenty years less to compound. So, the best thing to do is to start saving money immediately in order to be able to anticipate any financial emergency on the way.

2. Develop a spending plan

After graduation, make sure to develop a spending plan in order to avoid unnecessary purchases and to reduce your expenses. Make sure to make a budget in order to determine how much money you need for fixed expenses, including rent, gas and groceries. Make sure to avoid non-essential purchases so that you have more money left from your paycheck every month.

3. Set up an emergency fund

By setting up an emergency fund you will be able to meet your financial obligations. Many people are forced to liquidate their 401k or withdraw funds from their IRAs. However, both practices are not recommended as they incur additional fees and penalties for early withdrawal. Also, if you have set money aside, you will not be forced to withdraw money from your credit card, thus accumulating more credit card debt. Make sure to save maximum 6 months worth of your living expenses for setting up an emergency fund and have a cushion to anticipate financial emergencies.

4. Consider a Roth IRA

By starting a Roth IRA you can avoid paying taxes on your investment earnings until maturity. Provided that you meet certain criteria, the amount withdrawn upon retirement is not taxed because the taxes are paid when you start your investment and the principal grows tax-free. For example, if you put $3,000 a year to your Roth

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