The Best Financial Advice for New College Graduates
6 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.
Best Financial Advice for New College Graduates
- The Higher Paying Job Isn't Always the Best Job: 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. 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 most of them lack the discipline to save, and end up blowing 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. It might be worth checking out the article following article: Your Car Payment Can Keep You From Qualifying for a Mortgage.
- 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 matter to you. Don't get sucked into trying to afford a certain lifestyle. For everything you need to know about budgets, from getting started to staying motivated, be sure to check out the resources at Budgeting 101.
- Start Saving Now: Thirty-one percent of young adults aged 18 to 24 have zero 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 401k, 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: When you needed to learn about mathematics, you took a math course or read a math textbook. The best way to learn about personal finance basics is to read a good personal finance book — one that covers all the basics without boring you to tears. That's why I wrote Everything Personal Finance in Your 20s and 30s, available at Amazon.com and other online bookstores and at your local brick and mortar bookstore. It's an easy read and a great overview of how the world of money works.