I’ve mentioned how living at home is a great way to save, but many of my friends don’t take advantage of this opportunity. I’ve had friends living at home (making double my income) who have fallen into mountains of credit card debt…and this is without ANY bills! Since I’ve saved around $3,000 in the past three months I thought I’d share my tips for staying on track.
13 Financial Tips for New College Grads
1) Make a Budget – Set a strict budget and stick to it! I have a few jobs and the one that pays the least is babysitting..about $100 a week. For the past few months I’ve been using ONLY this money for my expenses. Since I live at home and don’t pay for bills or food this was completely doable, but you don’t have to be as extreme as I’ve been. Creating a budget is all about finding what works for you and being aware of where you’re spending your money. Using sites such as Mint.com (don’t worry it’s FREE) will keep you on track and show you where you need to cut back.
2) Build Credit – It’s not a bad idea to have credit, but it can be tempting to spend money you don’t have. One of my friends racked up $6,000 in credit card debt while living at home. What?! Don’t make the same mistake. Take out a credit card with a low limit (I’d say $300-$500 a month) that you know you can pay off in full. Making the full payment each month will keep you responsible and prevent overspending. Also, take advantage of cards with rewards programs! This is a great way to make a credit card worth using.
3) Read Financial Resources – I love to read (I was an English major) so I constantly have a book in hand. I have to admit though, that even I rarely read books about finance. Recently I was told about the book Generation Earn: The Young Professionals Guide to Spending, Investing and Giving Back. Until I heard about this book I wasn’t really aware that there were books with financial advice specifically for recent grads. Reading books like this is a great way to invest in yourself and build your understanding of money basics.
4) Save at Least 20% of Salary – We recently held a twitter chat where we discussed living frugally versus living cheaply. Author Clare Levison explained that you should be saving at least 20% of your salary. If this seems too steep start small. Get used to adding to your saving every week, so it becomes a habit. As your salary grows start saving more. You can even have a portion of your check sent directly to your savings, so it will be there before you even have to miss it.
5) Invest Now – Whether in 401K, Roth IRA, or the stock market, investing your money will help you save and prepare for the future. When my mother passed away three years ago I inherited a small sum of money from her insurance policy. My father and I invested in a few stocks, a few of which doubled in value! I haven’t touched that money yet, but I don’t regret it. Living at home has made it possible for me not to have to dip into this nest egg and now I will have savings for the future.
6) Set Up an Emergency Fund – Most of my friends spend all of their income every week. While I understand how bills can eat up your paycheck, it’s important to set up an emergency fund. Emergencies can happen to anyone (yes, even us 20-somethings) so being prepared is key. Having at least $500-$1000 in an emergency fund is a great starting place for recent grads. But, eventually you’ll want to have enough saved to cover 3-6 months of expenses!
7) Get Advice from Friends and Family – I’m not saying to take the advice of everyone you know, but if you have friends who studied business or a relative who’s very successful feel free to reach out. Learning from others’ mistakes and successes is a great way to improve your own finances and simply add to your personal knowledge.
8) Use Free Online Resources – Read blogs! If you don’t want to dole out money on books, finance blogs can answer many of your questions. A few of my favorites (besides Bargain Babe of course!) are Wisebread, Bankrate, and the Billfold. These blogs offer answers to financial questions that you may not even have known you had. Educating yourself is the first step to being financially secure.
9) Splurge Occasionally – Living frugally doesn’t mean living without fun. I’ve saved money while still splurging occasionally. I have one rule when I splurge…I have to really enjoy this purchase. When I decided to join Crossfit (it’s steep at $99 a month) my friends thought I was crazy, but I had previously been spending $50 for a gym membership I hardly ever used. For me, this was worth the cost. If you want something (and you can make it work) feel free to splurge once in while. Just not once a week!
10) Limit Weekend Spending – It’s easy for the budget to go out the window on weekends, especially for recent college grads. Between drinking, visiting friends, and going out to dinners racking up a high bill is easy. But, you don’t have to miss out to save. Use sites like Groupon and Living Social to save when going out with friends. It’s rare I go out to eat without a coupon of some sort. My friends laughed at first, but have recently started adopting the habits they once called “weird.”
11) Make a Debt Plan – Just like it’s important to have a budget, it’s vital to have a plan for paying back debt. Many college grads leave college with thousands in debt (my boyfriend has $153,000 in college debt!) and it’s important to have a plan to pay this back. Make a strategy for paying off debt. Whether that means consolidating loans or being devoted to paying back a certain amount each month, having a plan is vital to getting out of debt.
12) Travel Frugally – I love to travel. In fact, I tend to spend the majorityof my savings on traveling. In my opinion, the key to traveling in your 20s (and on a strict budget) is traveling with groups. Right now is probably the only time it will be acceptable to squish eight people into a hotel room or road trip cross country with a car full of friends. Traveling with a group significantly cuts cost AND makes the experience so much more fun. However, you’ll also want to budget for trips. Make a strict budget for your getaway and stick to it! This weekend I’ll be in Atlantic City with 15 friends and my budget is $150. It can be done!
13) Make a Down Payment Plan – You probably want to buy a house one day right? Well, you’ll need to be able to have enough for a down payment. While this can seem impossible when you barely saved enough for that first/last month of rent needed for your apartment, you can do it! A home that sells for $200,000 will typically require a down payment of $20,000 – $40,000. Determine how you can start saving for this. Do you have a plan for the next 5-10 years? Start thinking!
What are your tips for new college grads?
Start paying off your student loans as soon as possible. Every month that you defer payment the interest for that month is added into the loan amount. It is also the one debt that you cannot have discharged if you file for bankruptcy.
Treat your credit cards as if they were cash and make sure to pay them off at the end of each month. Your statement will tell you how much money you will save if you pay in full at the end of month vs. paying only the minimum amount due over time. It will be a real eye opener.
Don’t try to keep up with your friends lifestyles. Living frugally and smart with some money in the bank will protect you and give you peace of mind during a downturn while your friends will be struggling. The saying “He who dies with the most toys wins” is a crock and a sure way to financial ruin.
Fantastic post ! Take it from someone who blew through their credit card limits in their 20’s, paid for it with financial ruin in their 30’s and is now learning all these new lessons (via blogs) in my 40’s. I have a totally new respect for money, how I keep it and how I choose to spend it. If I knew in my 20’s what I know now, I would have a comfortable money cushion in the bank. Twenty years later, I am learning new ways to make my money grow – nickel by nickel – and how to hold on to it. To the person who posted this – Keep up the good work!
I really want to start building credit, but do it in a smart way so that I don’t end up in debt. It sounds like using a low limit credit card would be my best bet! Using this to pay utilities and WiFi would definitely help me to build good credit. Thanks for sharing the tips!
Adriana @MoneyJourney says
This is good advice for new college grads. However, it’s possible that not many are able to save as much as 20%. Of course, saving as much as possible would be awesome, but 1 fifth of a salary might be difficult for those who are just starting out.
Sutton Turner says
I like how you suggested starting a savings plan of 20% of your salary to begin your financial planning. I graduate in May and am excited to finally be done with school and have my degree. Thank you for the tips to prepare me for this huge change!
Corina V. Pitcher says
Thank you for sharing this article with such good content. Good luck in the following article.
John smith says
Amazing tips for students thanks for share it.
Emily Blunt says
Great suggestion for the students
Great article thanks for this useful post for students.
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