The Best Financial Advice for New College Graduates
Things Every New College Graduate Should Do
If you're on the verge of graduating from college or you've recently graduated, congratulations! For many young adults, college graduation marks a major transition into adulthood and the world of post-graduate employment. It also ushers in a new phase of personal finance.
Though it's not true that every decision you make in your twenties will have lasting effects on the course of your adult life, there are some that have bigger implications than others. Many of the decisions you'll make will center on your finances. As a free graduation gift, here's some of the best financial advice for new graduates we could find.
While there is a lot of financial advice floating around out there in the universe, the following are some of the more useful and common-sense pieces of advice that, if followed, won't steer you wrong.
Higher-Paying Jobs Aren't Always the Best
Job prospects are bright for new grads. According to research from Korn Ferry, average starting salaries for the Class of 2017 hit an all-time high, although growth was almost flat into 2018, with average salaries up just 2.8% to $50,390. But more money doesn't necessarily equal greater job satisfaction.
If you've chosen your desired career path, remember that a lower-paying entry job in your desired field is likely to be a better deal in the long run than a higher-paying job in a field you have no long-term interest in. Accepting a job in an unrelated field simply because it pays more can either delay your career progress or worse, trap you in a field of work that may not make you happy.
Think Twice Before Moving in With Your Parents
Approximately half of new grads move back home after graduation, often due to overwhelming student loan debt. Thinking of moving back in with your parents to save money? Think again. It's difficult to move back home when you've been independent. You'll grow faster and learn more by being on your own, even though it may be a struggle at first.
Many college graduates return to their parents' home to save money, but some lack the discipline required to save and end up spending their earnings on cars, entertainment, electronic gadgets, and their social life. Moving home will work for you only if you're sure you won't fall into that spending trap.
Don't Buy a New Car
You may be tired of driving a clunker in college or having no car at all, but buying a brand new car is a costly mistake that could keep you on a tight budget for years. Instead, consider buying a car that's one to three years old and save a bundle of cash.
You can get a car that looks like new for a lot less money, and instead save for another important purchase, like a down payment on a house.
Get Into the Budget Habit
Fifty-eight percent of young adults fail to routinely make a budget for their spending. If you're in that category, don't get turned off by the "B" word. Budgeting isn't simply an exercise of "living within your means;" it's about being knowledgeable and prepared for whatever life throws at you financially.
Think of a budget as a spending plan to guide your spending and saving so you can have the things you really want and that really matters to you. Don't get sucked into trying to afford a certain lifestyle.
Start Saving and Investing Now
According to a 2018 Bankrate study, 23% of Americans have no savings at all, while another 22% have only enough savings to cover three months of living expenses. And as a group, young adults, aged 35 or younger, have the least amount of savings in the bank. When you're creating your budget, be sure to incorporate savings into your "expenses" equation. This means building up an emergency or "rainy day" fund, saving up for larger future purchases, and yes, contributing to a retirement account.
If you're lucky enough to have access to an employer retirement plan like a 401(k), use it! If they offer some sort of contribution match, try to maximize it. If not, open an IRA and begin making contributions there. By starting to save for retirement in your twenties, you can greatly impact your future financial security.
Educate Yourself About Personal Finance
The best way to learn about personal finance basics is to find a financial expert that resonates with you and study their advice. Many financial experts, such as Dave Ramsey, Suze Orman, and Rich Dad Poor Dad's Robert T. Kiyosaki, offer instructional books, podcasts, YouTube videos, audiobooks, seminars, and other content geared toward educating people about how to best manage their finances. Decide which way you learn the best, and dive into content that can help you learn how to create your financially secure future.