If youâ€™re a new grad whoâ€™s 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 â€¦ but Donâ€™t Wait Around for Your Dream Job
Youâ€™re smart, enthusiastic and ready to change the world â€“ 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, itâ€™s not likely. More likely youâ€™ll figure out the industry you want to work in, or the kind of work you want to be doing, and youâ€™ll find a job in that industry. But it will be sometimes-boring work that just only pays the bills â€¦ and they will want you to be at your desk all day, Monday through Friday. Donâ€™t get discouraged. Itâ€™s in this job where youâ€™ll 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 youâ€™re right out of college, you may not be applying for jobs that pay much more than a living wage. Luckily, todayâ€™s 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 doesnâ€™t feel like it, you likely have more free time and energy than youâ€™ll have the rest of your life â€“ make the most of it!
Create a Budget
As soon as you start getting steady paychecks, whether youâ€™re salaried or hourly, figure out how youâ€™re going to spend your money. Essentials like rent, utilities, food, transportation and student loans come first, followed by savings. Donâ€™t 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!) donâ€™t sneak up on you. Whatâ€™s 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 moneyÂ 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 â€¦ if theyâ€™re cool with it.
Establish Credit â€¦ but Donâ€™t Rack up Debt
Whatever you do, donâ€™t spend more in a month than you make. Thatâ€™s 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 youâ€™re 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 youâ€™re hardly making any money so it feels okay to wait until youâ€™re earning more to start putting it away. There will always be more things to pay for â€“ 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 doesnâ€™t 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 youâ€™re ready to retire. If you wait until youâ€™re 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 donâ€™t take advantage of it, youâ€™re throwing money away. If you can, try to save beyond the match. Â
Start an Emergency Fund
Keep an easily-accessible savings account thatâ€™s separate from your retirement fund and add to it consistently until you have amassed about six monthsâ€™ worth of living expenses. If youâ€™re 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 youâ€™ve 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, youâ€™ll be able to build it back up quickly. If your expenses increase, so should the amount in your emergency fund.
Use a Savings App â€¦ but Just for Fun
Money-saving apps likeDigit and Acorns are fantastic â€“ they pull small amounts of money from your accounts and save them for you without you even noticing. But donâ€™t 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
Itâ€™s 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 wonâ€™t make you happier. So every time you get a raise, even if itâ€™s just an annual cost of living increase, use it to up your 401(k) contribution. You wonâ€™t miss the money you never got used to having. It will pay off in the long run.
Spend Your Money on Experiences, Not Things
Thereâ€™s more to life post-college than saving, of course. When you spend your money, make it count. Youâ€™ll 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.
Itâ€™s easy to think the moves you make with your money as a recent graduate donâ€™t count â€“ like youâ€™re just practicing for when youâ€™re making real money in your real career. But thatâ€™s not true. The choices you make now will determine how youâ€™re able to live for decades to come.
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