- Learn what money tips all college graduates should have
- See what mistakes to avoid when it comes to your money
- Make extra money with surveys and starting your own blog!
Graduating from college can be one of the biggest milestones in our lives.
Capping off the 17-20 years of education and getting thrust into the “Real World,” seemingly comes and goes in less than 2 hours.
But like great marriage advice, I got, stating it is not the wedding day that counts – it is all the subsequent days after – the same can sorta be said for college graduates.
While graduating from college closes one door, it also marks the opening of countless other doors. New graduates will begin to pursue new careers, relationships, cities, and lifestyles, all while dealing with something they really never have had much of…
So what does a recent graduate do with their money?
Here are 6 tips I wish I knew about money after I graduated from college. In other words – learn from my wins and my mistakes.
Money Tips for New College Graduates
#1: Pay Off Student Loan Debt Fast
Graduates from 2016 are facing an average of $37,000 in student loan debt according to the federal student aid website.
But whether you have $10,000 or $40,000 in student loan debt (Like I did in 2009), you should really pay them off ASAP.
Think of student loans like this:
- Student loans are a burden and should take precedence overspending
- You need a strategy to pay off student loans
- You should attack your student loans prior to moving out on your own for the first time
- The faster you pay them off, the more money you will have to do what you want.
- Myths about student loan forgiveness are TOO risky & unstable to wait around on!
- Refinancing only makes sense in some scenarios. If you decide to refinance your best bet is going with Penfed or Lendkey.
Personally, this is where I screwed up some. With most of my undergraduate loans in deferment, I only paid the minimums… and waited until 2016 to get rid of them all.
I should have taken 75% of my income and just paid them off while I lived at home. If you are new graduate from college my biggest money tip – accelerate your student loan payments and get rid of your student loans as fast as possible!
#2: College Grads Don't Buy New Cars
Don't be tempted by the commercials advertising, “Why all new college graduates should get a new car.”
Sorry – but you don't deserve a new car. In fact, if you have student loan debt you need to first pay that off and start saving before you ever buy a new car. Learn from me.
Instead of paying down my college debt and being debt free at 23, I did what most first time professionals do… I splurged on a car!
Little did I know this would hurt me when I went to buy my first home because of my debt to income ratio, … something I had no clue even existed.
The monthly payment wasn’t bad because I was able to “afford” it, but between my student loans and my car, 45% of my income was already accounted for.
In other words, for ever $10 I made $4.50 went to my schooling and car debt. If you have to buy a car to get to work make sure to buy a used car.
If you have trouble with this one see #6 below – delayed gratification – don’t worry about trying to fit in!
#3: Live on a Budget
Typically, after landing your first adult job upon graduating from college, you will start receiving some sizable checks in comparison to what you are accustomed to.
More than likely, your first check will be the most money you have ever gotten in one day ever..! But just because you make it, doesn't mean you should spend it.
Landing your first salaried position and receiving those first few bi-weekly checks and operating without a budget is comparable to handing a 16-year-old a yellow Lamborghini for their first car.
I personally thought, “Who needs a budget when you live at home?” Though teaching doesn’t pay some astronomical, high-end salary, learning to budget my first professional income would have been smart. (See budget sheets here)
Sure the 16-year-old can legally drive a Lamborghini, but will they use it appropriately?
Life gets wildly more expensive the older you get. What might seem like a lot of money living at home or with friends can quickly evaporate once you gain true independence.
It’s best to start learning how to manage your money early rather than later.
#4 Save & Invest
Sometimes I like to play the what if game… like what if I invested in Amazon in 2010 ($118 a share) or Facebook in 2013 ($32 a share). Similar to the movie Hot Tub Time Machine, I would probably be a happy man had I thought more long term and not at the moment.
Practice saving and investing in your early 20’s. In fact, after paying off all of your student loans get used to investing/saving at least 25% of your income.
You can easily invest with the following tools & very little knowledge (like me):
- Acorns – auto round-up investment tool using “Spare change”
- M1 Invest – robo investor for new to investors
- Vanguard – stock index funds using an online brokerage account
Starting this habit at 22 when you don't make A LOT of money will set you up nicely in the future. Besides – you don't know what will happen in the future so you won't want to wait until retirement… to start thinking about retirement.
For the millennials – relying on social security is about as stable as the 2008 economy.
So practice a general rule of thumb of paying yourself first. Your savings goal should be to have your annual salary in savings by age 30.
See how much you should have saved by age here.
#5 Start Entrepreneurship at 23, not 28
Both good and bad, we are conditioned from kindergarten to be employees. Follow the rules, walk in a line, complete tasks, sit in your seat, and report to higher up’s.
Entrepreneurial skills are often self-taught or inherited from our parents. Not to mention our grandparents couldn't start a blog or website in their underwear late at night.
But the internet changed all of this. It has never been easier to start an online business or even a side hustle that can become an online business.
Conventional wisdom tells us the only way to have success is to go to college and be careful when it comes to entrepreneurship – it is risky…
Working for 40 years and hoping for social security seems riskier. When you are young you have more time, fewer family obligations and the ability to earn – take advantage!
Remember you can work hard now and play later, or you can play now and pay later, but either way, you will pay the price at some point.
#6 Learn how to delay the good
Time and time again, the millennial generation gets a bad wrap for perpetuating the instant gratification culture.
Known as the quitting generation, millennials, and young people as a whole need to learn how to make short term sacrifices and to delay their gratification.
It has never been easier to live in the moment… but everyone (Not just millennials) will inevitably need to put pleasure on hold at some point.
Start becoming fiscally responsible in your early 20’s. Pay your own bills and learn to say no rather than yes to every social gathering, wedding, event and whatever else.
Learning to say no is a great skill to develop and goes hand in hand with delaying gratification. Here are some quick tips to help you delay gratification:
- Limit social media use
- Stay away from people who only want to spend money
- Be mindful of your associations
- Find free activities
- Go outside more
- Stop comparing yourself to others
My takeaway when it comes to money after graduating from college:
Recently I wrote a post on my 32 birthday listing out 8 things all 30 somethings should do in their 30's.
Financial literacy (knowledge of $ for my simple mind) is not as complicated as you might think. If you play your cards right from 22-30 you could become a millionaire in no time – not kidding.
I recently ran across an article on Millennial Money about a Grant Sabatier, author of Financial Freedom, who had over 1.25 million in savings… by age 30.
As I devoured what he did to accomplish such an impressive feat at a relatively young age, I realized the author had more financial knowledge when he started his journey at 23, then I did at 28,29 and even 30.
So when I realized I sucked at money at 23….24…25… and all the way to 28, I wondered what it would be like to go back to 22 right after college and “redo” a few things.
As a college graduate, I recognize the most 20 somethings know everything… but sorta like a wise man once said, if you know everything, one would think you would have everything?
I made plenty of mistakes with my money in my 20's and after graduating from college. From buying brand new trucks to not investing a single dollar, let's just say I screwed up.
I was in desperate need of financial advice that would have saved me from myself… and most likely some money in the process.
So if you are just graduating from college, I hope this blog post finds you!!!
Note: Share with anyone who you know is getting ready to graduate from college!
Q: What are some tips you have for readers when it comes to money after graduation?
Josh writes about ways to make money, pay off debt, and improve yourself. After paying off $300,000 in student loans with his wife in less than five years, Josh started Money Life Wax and has been featured on Forbes, Business Insider, Huffington Post, and more! In addition to being a life-long entrepreneur, Josh and his wife enjoy spending time with their chocolate lab named Morgan, working out, being outside, traveling, and helping others with their finances! I got serious with money when I used Personal Capital to track my finances.