Seroiusly, where does time go?
Perhaps you are like me and it feels like just yesterday you were moving into the dorm rooms and now all of a sudden you're sitting on your computer reading about money as a recent college graduate.
First, congrats on graduating. Having a college degree might come with an expensive price tag these days, but you're in good shape as far as the money-making outlook goes.
As the bubbly settles and the aftermath of the 4-5 year college ride start to slow down, the big “Life” questions start to take their turn…
- What will you do for work?
- Will you go to graduate school?
- Should you save?
- What money moves should you make if you make less then $50,000?
- Should you invest or pay off debt?
So now you're in search of the best money advice for recent college graduates. Answers about money, life after college, and just general financial help.
Experian (A consumer credit reporting agency) recently put together an expert panel of financial authors, bloggers, and other financial experts to help answer these pressing questions for recent college graduates.
10 Money Questions Answered for Recent College Graduates
Here is the summary of the live Q & A session where recent graduates got to ask their money questions.
1. Assessing your financial situation.
College graduates should assess their financial situation ASAP, in fact it really starts right after high school. At age 18 we are all considered adults and have every adult right (Aside from legally drinking), which includes being able to apply for student loans, credit cards, and so on.
Personal finance can also be referred to personal discipline. So first thing is first if you just graduated from college:
- Consider establishing an emergency fund,
- Realize that if you have student loans they will HAVE to be paid back,
- You should have a working budget
- Create a long term financial plan
Don't become a financial drifter after college, learn quickly to save and your future self will be really glad you did.
2. Best Budgeting Practices
60% of adults do not operate on a budget. Roughly 78% live paycheck to paycheck.
Notice a trend?
After graduating from college, make sure you know where your money is going. For starters, having a budget should help you track every dollar. Every dollar should have a purpose, meaning you're paying off debt or investing (Simple investing is easy with apps like Acorns).
For starters, assess your past few months spending to get a gauge on where your money is going. Secondly, use this living forecast sheet designed to help you plan out the year.
Whatever works for you works for you, just remember to always have a working budget and to use apps like Mint or Personal Capital to help you track!
3. Recent Graduates and Student Loans
In 2016, 70% of college graduates graduated with an average of $37,000 in student loans. Chances are if you just graduated from college, you're six months or less from starting to pay your student loans.
Whether you got some bad advice, such as take out loans no matter the cost to pursue a college degree or you were strategic, if you have student loans it is time to start paying them off.
Here are some options and resources if you have student loans:
- Recognize you will pay off your loans at some point, so why not start now
- See what creative ways you can use to help pay off your student loans
- Read up before refinancing student loans.
- Find a strategy to help you pay your student loans off fast.
4. Credit Cards after Graduation
What every college graduate, or person for that matter, should know about credit cards is that a credit card is one of two things:
- An asset
- A liability
The choice is yours. Don't think a free sub is worth a credit card (true story).
You will hear quite often that you need to build your credit… but don't build your credit at the expense of hurting your financial position and acquiring debt.
The number one factor to consider when it comes to credit cards – don't spend it if you couldn't buy it with cash. Get in the habit of using credit cards only to track spending and leverage the rewards.
For 1st-time credit card users, start by only using your credit card for necessary items like cellphone bills, insurance, gas, and utilities. Don't get in the habit of using your cards for spending, instead use your debit card or cash.
5. Job Benefits & 401K
What sort of job benefits should you look for when selecting a place of work after college?
A great financial philosophy is to never leave money on the table. If a company or potential job offers 401K match or anything of that nature, consider it free money.
Think about it, if your contributions are matched 100% then that is 100% free money you wouldn't have otherwise.
Other benefits to look for as a new college grad:
- Health insurance costs
- Student loan repayment perks.
- Commuting reimbursement
- 401 K Match (always take the free money)
>> Helpful Resource: The Best Way to Invest $1,000
6. Recent Graduates Entering the Workforce
For recent graduates entering the workforce for the first time, make sure you don't treat your salaried position like you're “Rich.”
In most cases, if you just graduated and landed your first career it will be the most money you have ever made. Now that you get a bi-weekly check doesn't mean you can go buy a new car and spend more money then you make. Treat your first job serious and make sure you're working hard.
Work Advice for recent college graduates:
- Don't think you know everything. Realize that having a college degree these days means less then it did 30 years ago, because chances are most of your co-workers have a college degree too.
- Learn as much as you can from others so you can advance quicker (Both do's and don'ts).
- Stay away from office politics
- Persevere when you hit challenges, remember just like college, most challenges are temporary.
The biggest knock on most recent graduates entering the workforce is that they are impatient, can't problem solve and have what is referred to as an “Entitlement” mentality.
Related: How to Ask For A Job Raise
How do we curb this generalization? Realize that in 4 weeks you will not be at the pinnacle of your career. Learn to persevere and attain some mental toughness along the way and embrace challenges and problems as learning opportunities.
7. Renting vs. Owning
What should recent college graduates do when it comes to renting and living on their own?
Depending on your new job and where you live will really determine your living situation. For example, if you from the midwest and you got a job in Seattle, you will have to find a place to live.
Additionally, if you happen to have the ability to live at home for 1-2 years, swallow your pride and do it. Going from living on your own back to living with your parents isn't always easy, but financially its very smart.
- You can pay down your student loans
- You can save your money
- You can save for a down payment for a home and skip renting all together
If you do decide to live on your own, figure out how much it will cost. Got the number? Now save that amount for 6-12 months with no exceptions. Get used to living a lifestyle based on the leftover income.
Too many recent graduates move out too quickly, they realize that living independently and maintaining their lifestyle isn't possible, so they sacrifice savings and debt payoff, and they throw entertainment on a credit card.
It's worth noting that you should consider a 15 year mortgage or paying off your 30 year mortgage.
8. Investing after graduation.
Most of the financial experts on the Experian panel said start small. Keep in mind 1 in 10 makes money playing individual stocks (If it was easy everyone would do it).
My personal plan is this – create an emergency fund, pay off your student loans, then invest. Investing isn't a bad year to start when you're young because you will see your money compound sooner.
Also, while investing is risky, it is better to take the risk at 22 then it is at 52. A safe bet is to open an investment account and invest in stock index funds.
Also, max out contributions at work to your HSA or other investment accounts.
Best ways to invest:
9. Making Ends Meet After College
Struggling financially after college is becoming more and more common. For most, they did what you were told, got the good grades, took out the loans and now they can't find a job. Honestly, that is why I started this blog.
However, part of the struggle is related to a common misconception that a college degree is a golden ticket. Maybe 40-50 years ago a college degree was a golden ticket, but today they're a dime a dozen.
Here are four things that can help you if you're struggling to make ends meet after college:
- Set a goal to apply and network DAILY!
- Learn to start a blog or website with your time off (some cash is better than no cash) and grow it overtime
- Read up on side hustles, because ultimately you should have one anyway!
- Consider your work environment before just jumping on an opportunity.
10. The best money tip for college graduates is…
Last but not least, the number one personal finance tip for recent college grads is to pay yourself first! Read about the concept here, but basically figure out your income and your fixed expenses (The amount left over his hopefully a positive number).
Take that positive number and dedicate a specific amount each month to your future – by either investing, saving, or paying off debt. No matter what you do, if you follow this one basic rule you will set yourself up for ton's of options down the road financially!
There are my top financial tips for college graduates!
Hope you enjoyed this post. Please share it with recent college graduates or people who could benefit from some of this information!
Q: What financial advice would you give to recent college graduates?
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 many more! In addition to being a life-long entrepreneur, Josh and his wife enjoy spending time with their newborn son, their chocolate lab named Morgan, working out, being outside, traveling, and helping others with their finances! In case you were wondering, Josh uses Personal Capital to track his net worth and his first investment account ever was an Acorns account 😎