Graduating from college can be an exciting (and scary) time in your life. Trust us, we’ve all been there and (fairly) recently too. 😉
When you approach college graduation, there are a lot of things you have to think about, like where you want to live, if you will be moving, searching for and finding a job, and more. With all these important life decisions looming, it can be easy to forget to think about your finances. But that doesn’t stop the student loan debt you’ve accumulated from coming due just a few short months after graduation. It also doesn’t stop the bills for your rent, utilities, groceries, car payments, etc. from coming in either.
College grads are being faced with many challenges and one of them that should be forgotten is money management. We all made some mistakes along the way with our money, so we hope sharing our favorite money tips for new college grads can help you avoid some of these things yourself.
Find a Balance Between Fashion and Frugality – You Don’t Have to “Keep Up” with Your Elders
One of the biggest challenges I had was keeping my spending under control as a new college grad. I had landed a well-paying (for my area) full-time job and was making more money than I’d ever earned before in my life. But the down-side was I was also spending more money than I ever had in my life too.
I felt pressured to “keep up” with the people at my office in multiple ways. I didn’t have as nice of a car as my co-workers, and I didn’t have nearly as many clothes, shoes, makeup, and accessories either. I went on a huge shopping binge and spent way too much money to try and keep up and ease the pressure I was feeling.
Since then I’ve learned that it’s never a good idea for new college grads to try and “keep up” with their elder co-workers, friends, or neighbors. There’s no way you can afford the same lifestyle as someone who’s been out of college for far longer and is earning far more money than you are. Even if you go into debt to keep up (like I did), you’ll still end up losing out eventually. It’s not a sustainable way to live when you are first starting out.
I still love fashion but I’ve worked hard to find a balance between fashion and frugality so I can enjoy the best of both worlds.
Start Saving for Retirement as Early as Possible
The biggest financial regret I have from back when I graduated is that I didn’t start saving for retirement right then and there. Instead, I focused on saving…and putting money away in my savings account. However, the gains on those are paltry when compared to the gains you can experience in the market.
Unfortunately, no one told me I could open a Roth IRA all on my own. I thought the only option was to contribute to a 401(k), which none of my employers ever offered. I either worked for small companies that didn’t have one, or companies that required you to be there a year or longer to start contributing.
I really wish I knew about other options early on. I only opened my Roth IRA toward my mid-20s, and by then, I had already lost out on years of compound interest, which can make or break your retirement savings. I kick myself every time I think about it.
That might sound silly. Why am I so focused on saving for the future? Because no one else will save for us. It’s highly unlikely we’ll have access to social security, at least in the form our parents benefit from, and employer-sponsored retirement plans are putting more weight on us to contribute. It’s up to us to have a secure retirement fund in place when the time comes.
So if you have an awesome 401(k) plan at work that offers matching contributions, make sure you’re taking advantage of that free money. If your employer doesn’t offer a plan, look into opening an IRA with a brokerage. There are plenty that offer one. Every day you delay saving for retirement is possibly another day of work down the road. I don’t know about you, but I prefer freedom!
Keep Living Like You’re In College
I know this is not what most people want to hear, but it’s best for new college grads to keep living like a broke college student instead of treating yourself to things like new cars, a new apartment, and extra impulse buys. I was actually one of those people who financed a car and took a vacation not even a month after graduating. But, I financed a used car that I could afford in order to get back and forth to work and I kept my vacation frugal.
After those purchases, I committed to keeping my living standards low. I lived in a small affordable apartment with no amenities, continued to dine out less and found frugal ways to entertain myself. Most important, I started paying off my debt immediately. I hope to have my student loans paid off completely by the end of next year – just 3 years after graduating college.
There’s nothing wrong with treating yourself every now and then, but you can save so much more and become more financially stable if you don’t try to keep up with the Joneses when you graduate college and avoid lifestyle inflation. Let your friends buy houses, go on trips etc. and keep saving and investing your money as you build your career. You’ll soon pass everybody by in the years to come and you won’t be so stressed out about money either.
Do you have any other tips for new college grads? Did you make any money mistakes after you graduated college?