8 Financial Tips for Recent College Grads
Congrats!!! You did it, all of the hard work and countless hours of studying finally paid off. Now welcome to the “real world”. Now that you’re about to begin this journey into your career path I want to give you guys some advice that I learned over the years. When you get your first job it will most likely be the highest salary you’ve earned to date. You will have the urge to splurge and that’s perfectly fine. Just don’t go over your head with lifestyle inflation. You already know how to survive on ramen noodles, cereal and pizza so don’t act like you can’t survive without visiting a fancy restaurant every week.
1.) $ave $ave $ave
Pay yourself first. Start to get in the habit of paying yourself and building your net worth. Cash is king!! You will run into emergency situations where you have to foot the bill for unexpected expenses. You don’t want to always rely on credit cards because it can lead down a spiral of more high-interest debt. An easy way to save is to automate your savings each month to a savings account separate from your checking. Also, you may not even like the career path you’re getting into but if you have some money saved up it can further ease the transition into starting a business or switching career fields.
2.) Get Insured
Dental, medical, auto, renters, short-term disability and life insurance all that stuff lol You never know what could happen so it’s better off to be insured just in case. A few years back I had all 4 of my wisdom teeth removed and it cost me about $300. It would’ve been over $1500 if I didn’t have any dental insurance.
3.) Pay off Consumer Debt
Pay off all high-interest debt like payday loans, personal loans and most importantly credit cards. Paying the least amount of interest will save you a bunch of money in the long run. Paying high-interest does not help your overall net worth. It’s like throwing your money into a pit of fire.
4.) Attack Student Loans
If you have student loans, try to set up a goal to pay them off. The quicker you pay them off the faster you can start building wealth. Don’t just make the minimum payments, add a couple hundred dollars or whatever you feel comfortable with to the principal so you can save on interest in the long run.
5.) Start Building Credit
In order to purchase a car, home, get approved for cable or an apartment, companies run a credit check. In your early twenties, it is vital that you start building a positive credit history because that 3 digit score can either save you thousands or cost you thousands.
Related: How I Built My Credit Score
6.) Save for Retirement
There’s this magical thing that happens when you start to invest money and it is called compounding interest. If you’re young you have the biggest advantage with compounding interest because you have time. Contribute at least up to your company’s match to your 401k/403b plan. Increase this amount with each pay raise and watch how your money will grow over time. Additionally, a Roth IRA is an individual retirement account that gives you access to a variety of investments that will grow tax free. The annual contribution limit is currently $5,500 but the benefits can be outstanding during retirement. It’s a good supplement to your overall retirement portfolio. Read more about Roth IRA’s Here
7.) Don’t Buy A Brand New Car
Sorry guys, I know you think you deserve that brand new car cause you worked so hard to earn your degree but please rethink this purchase. Adding a brand new car to the pile of debt you already have is counterproductive. In the early stages of life, you should want to grow your nest egg because you tend to usually have less financial responsibilities than in your 30’s. A 2+ year old used car will save you on average 5k+ because cars depreciate quickly within the first few years. Or even better buy a car in cash so you won’t have to deal with any car payments.
8.) Budget Your Fun
Never ever forget to have fun within this lifetime. Travel the world, go out to concerts/festivals/sporting events etc… Set a certain amount of money aside each month for personal enjoyment so you won’t feel guilty splurging. It’s specifically for you to have fun. Apps like mint.com and learnvest.com are really helpful when it comes to budgeting your money.