Top 7 Money Tips for New College Grads
Life after college is kind of scary. You start a job. You might have moved to a new city. You might be looking for new friends. You’re just trying to figure it all out. Independence is cool and all, but it does come with an enormous level of responsibility. In the midst of all of these life changes, one of your greatest responsibilities is to figure out your finances. A lot of people complain that they should’ve gotten a personal finance class in high school. And, they’re so right. We all got sex ed but not financial ed? It makes absolutely no sense. We’re going to right this wrong today and talk about the absolute essentials you need to know about money and personal finance once you take off your cap and gown.
1. Understand How to Build Wealth
Building wealth is very simple. You need to increase your assets and lower your debts. By doing this, you will increase your net worth. When we talk about people who are wealthy, we are talking about people who have a high net worth.
A high net worth is not really about just building up loads and loads of money. It’s more about feeling more secure and free to do the things that you love in life. By building good budgeting, saving, and investing habits, you can increase your assets and lower your debts easily, thereby increasing your net worth.
2. Pay Off Your Credit Card Balance Every Month
Paying off your credit card balance every month is important so that you never pay interest on your credit cards. Paying interest on your credit card just doesn’t make sense financially. Honestly, you should not have a credit card if you cannot pay the credit card balance every month.
You want to be in a situation where you are benefiting from having a credit card, whether that be travel points, hotel points, or cash back. If you don’t pay down your balance in full, the interest you pay may very well be greater than the rewards you receive.
Also, forcing yourself to pay down your balance every month will build up your financial discipline. You will need that discipline to pay off other debts like student loans or a mortgage, as well as sticking to your budget and savings goals.
3. Make a Plan to Pay Off Your Debt
Whether it’s student loan, credit card, or car debt, you need to create a monthly plan for how you’re going to tackle that debt. As we talked about earlier, debt lowers your total net worth. Your student loan, credit card, and car debt aren’t productive loans, meaning that having the loan isn’t making you more money. Yes, you got a college degree and hopefully got your first job, but the student loan isn’t producing anything for you anymore, so you should pay it down.
Not only are these not productive loans, you are going to pay so much money in interest if you put off paying down the loan as quickly as possible. Why pay thousands of dollars to a bank when you can create a plan and tackle your debt.
The best part about paying down your debt as quickly as possible is that you will end up feeling free and independent. It’s such an amazing feeling knowing that you don’t owe anyone anything and that they can’t take your possessions if you end up in a horrible situation and can’t make a payment on your loan.
4. Save at Least $1,000 for Emergencies
Just do it. A couple of weeks ago my car stopped in the middle of the highway. Needless to say, I needed to buy a new car. Thankfully I could use my downtrodden car as a down payment, but it was a wake up call for me. I always knew that I needed an emergency fund. However, I’ve sacrificed building my emergency savings to pay off all of my student loans. Yes, it was for a noble cause but it wasn’t the smartest decision.
$1,00 is enough for you to feel secure if you have an unexpected medical, car, or family emergency. It’s not going to cover a major emergency, but that little cushion will make you feel so much better when you’re in any crisis. In the future, you want to build up an emergency fund of 3 – 6 months of your basic monthly expenses.
5. Start Saving for Retirement Now
Luckily, when I was a senior in college, I had a hour-long personal finance session during one of my classes. The session was taught by a professor that taught a wildly popular personal finance class, even though the class started at 8am. I never took the class because I thought I knew everything because I majored in business with a concentration on finance. Boy was I wrong. It’s good to be humbled, y’all.
I saved the powerpoint slides from this session and still have it to this very day, but the most important point I took away from that session was to save for retirement as soon as I started working. The professor said that companies would match the amount of money that I contributed to retirement and that I should not pass that up because it’s FREE MONEY.
My ears perked up when I heard the word free like any other college students’. And, when I realized that she said free in conjunction with money, I was all ears. Today, I contribute enough to my Roth IRA to get the full match of my company, which is $2,500. When I think about how much that is going to grow to in 40 years, I feel like I have just gamed a system (even though it’s completely legal lol).
6. Negotiate Your Salary
My palms were sweaty. I spent hours researching the average salary for my job, reading blogs that told me that I absolutely MUST negotiate my salary, and listening to pep talks on YouTube. With this knowledge, I picked up the phone call of the recruiter and made my case. It was such an easy conversation and lasted for a minute. He told me how would ask the manager and get back to me. I only got $1,000 more, but my confidence skyrocketed.
I cannot stress the importance of negotiating your salary. First, recruiters expect you to negotiate your salary. That fact totally changed my mindset about asking for more money. I thought to myself: they are expecting me to ask for more money, so if I don’t ask, I will be the super weird and awkward one in this situation.
Second, according to Linda Babcock of Carnegie Mellon, if you don’t negotiate your salary, you are probably leaving $1 MILLION – $1.5 MILLION on the table in lost earnings over your lifetime. Remember that getting even $1,000 more early in my career doesn’t sound like much, but if you’re getting raises based off of a percentage, then starting at $1,000 more has a huge compounding effect over time.
Also, it’s so important to develop your negotiating skills from the very start of your career. Bettering your negotiating skills will not only get you more money in the future by negotiating a raise, but it will also teach you how to advocate for yourself in general in the corporate world.
7. Make a Budget for Your Splurges
I’m not going to tell you not to splurge. I honestly do it all the time — just last Friday I ordered a $12 sandwich on GrubHub, but I did get a $5 discount that covered the delivery fee. Should I have splurged? Maybe not, but it made me feel a lot better about myself (and I’m a lazy person sooooo…).
You might think I only splurge on little things. Nope. I splurge on big things too like a trip to Paris for my friend’s birthday. Now that was like a $1,000 splurge.
But the reality is that I actually budgeted both of these splurges before making the purchases. I know that I’m going to spend at the very least $50 a month getting food delivered. Similarly, I know that I can’t say no when a friend asks me to go a trip.
So, look at the your monthly budget and see where you can incorporate your splurges. The budget could be for splurging on a $50 moisturizer or for your daily Starbucks run or for going to a Beyonce concert. Budget your vices.
What are you most scared about after graduating? Comment below.
This post contains content this is for informational purposes only, and should not be considered legal or financial advice. You should consult with a legal professional and financial professional to determine what may be best for your individual needs. Please read my Disclaimer for more information.
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