If youre a new grad whos feeling a little exhilarated, a little worn out and a little terrified about finding a job that pays the bills … take a deep breath. The great thing about this stage of your life is that while you have room to take your time, make mistakes and figure out what you want, you are also young enough to do a few key things right that will set you ahead of the crowd for years to come. Especially when it comes to money. Looking for financial advice after graduation? Here are ten tips to keep in mind:
Follow Your Dreams … but Dont Wait Around for Your Dream Job
Youre smart, enthusiastic and ready to change the world – surely an employer will see that and offer you a job that pays well, has lots of vacation time and lets you make big decisions. Right? Unfortunately, its not likely. More likely youll figure out the industry you want to work in, or the kind of work you want to be doing, and youll find a job in that industry. But it will be sometimes-boring work that just only pays the bills … and they will want you to be at your desk all day, Monday through Friday. Dont get discouraged. Its in this job where youll have the opportunity to show off your smarts, enthusiasm and ideas. And as a bonus you can figure out if the job you thought was your dream job actually is.
Take Advantage of the Gig Economy
When youre right out of college, you may not be applying for jobs that pay much more than a living wage. Luckily, todays gig economy gives you the opportunity to develop different skills and earn more money outside of regular working hours. As a recent college grad, even if it doesnt feel like it, you likely have more free time and energy than youll have the rest of your life – make the most of it!
Create a Budget
As soon as you start getting steady paychecks, whether youre salaried or hourly, figure out how youre going to spend your money. Essentials like rent, utilities, food, transportation and student loans come first, followed by savings. Dont forget to budget for expenditures that fall outside these categories. Set aside money for personal care (like haircuts, soap and a gym membership), clothing and gifts so these expenses (which can really add up!) dont sneak up on you. Whats left over can go straight to fun.
Minimize Your Expenses
If you want to save more and spend more on your hobbies and social life, it makes sense to make more money and spend as little as possible on your essentials. That means not buying a new car if your old one is still running, cooking basic meals at home rather than eating at restaurants, or maybe moving back in with your parents for a few months … if theyre cool with it.
Establish Credit … but Dont Rack up Debt
Whatever you do, dont spend more in a month than you make. Thats a surefire way to end up in a repayment hole, trying to dig your way out of piling interest payments. But you do need to open up some credit cards. I know, it sounds counter-productive. But establishing good credit is the best way to get low interest rates on car loans and get approved for rentals. Employers will probably check your credit before offering you a job. How do you do that? Open a few credit accounts (but not too many), put a few purchases on the cards, pay them off every month before they start accruing interest, then leave them alone. If a credit card company offers to increase your limit, say yes if youre able to follow the previous steps with no problem. A low credit usage with a high limit will increase your credit score.
Start Saving for Retirement ASAP
Retirement may seem far away. And it may seem youre hardly making any money so it feels okay to wait until youre earning more to start putting it away. There will always be more things to pay for – another car, a house, maybe even kids. Getting into the habit of setting money aside now, when your expenses are relatively low (even though it doesnt feel like it) will make it easier to do down the road. Second, compounding interest is real. The dollars you set aside this year will be a lot more by the time youre ready to retire. If you wait until youre 35 to start saving for retirement, your money has a lot less time to grow. Finally, your employer probably offers some kind of 401(k) match. If you dont take advantage of it, youre throwing money away. If you can, try to save beyond the match.
Start an Emergency Fund
Keep an easily-accessible savings account thats separate from your retirement fund and add to it consistently until you have amassed about six months worth of living expenses. If youre ever laid off, need to pay for an expensive car repair or medical bill or are faced with a natural disaster, this account will save you financially. Once youve hit your savings goal for this account, divert the money toward retirement or another financial goal. If you ever have to dip into your emergency fund, youll be able to build it back up quickly. If your expenses increase, so should the amount in your emergency fund.
Use a Savings App … but Just for Fun
Money-saving apps likeDigit and Acorns are fantastic – they pull small amounts of money from your accounts and save them for you without you even noticing. But dont rely on them to do all your important saving for you. Developing the discipline to actively put that money aside is important. It will help you stay financially stable throughout your life. Use these apps to save for non-essential goals, like travel.
Don’t Fall Victim to Lifestyle Creep
Its so easy to start spending more money as soon as you start making more money. But once you reach a point where you can easily cover your living expenses and have some fun, spending more probably wont make you happier. So every time you get a raise, even if its just an annual cost of living increase, use it to up your 401(k) contribution. You wont miss the money you never got used to having. It will pay off in the long run.
Spend Your Money on Experiences, Not Things
Theres more to life post-college than saving, of course. When you spend your money, make it count. Youll get more happiness from a concert with friends than a bigger TV, a cup of coffee at a diner with a date than a venti latte from a drive-thru on the way to the office, and a trip to Paris (even the one in Texas) than a new pair of impractical shoes.
Its easy to think the moves you make with your money as a recent graduate dont count – like youre just practicing for when youre making real money in your real career. But thats not true. The choices you make now will determine how youre able to live for decades to come.