Ten Big Tips for Recent College Graduates

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An academic building on the campus of the University of New Hampshire - Hamilton Smith Hall

Ten Big Tips for Recent College Graduates

Graduating from college is a big adjustment for most students as s/he has to trade-in an insulated, academic, environment for the so-called “real world.”  The transition from student to working adult is critical, especially in regard to getting your personal finances off on the right foot.  The foundation a recent grad lays in the 2-3 years after graduation often predicts how s/he will lead the rest of their economic life. If the recent grad is interested in a flashy new car, eating out, and living in an expensive city, for example, then s/he often delays saving money, paying off student debt, finding the right career, and being financially independent overall.

Here are some practical steps the recent grad can take to ensure that their personal finance life gets off on the right track (after all, you don’t want to be worrying about credit card debt by the time you’re 25, right?):

1: Begin paying off your student debt as soon as possible. 

It’s tempting to pay the minimum amount each month (especially if you have a low rate), but debt (outside a home mortgage) is a bad thing, so focus first on paying off your student loans (do this at all costs, no one wants to be paying off student debt at the same time they see their first gray hair!).

2: Continue to live with your parents and do not get an apartment.  

If you’re lucky enough to have parents who do not force you out (just because you’re over 18) or charge you to live at home, then you’ve hit the lottery (just think: free food, heat, water, TV, Internet, etc.).  Your parents can actually be cool to hang out with (just make sure to have plenty of wine in the house)

3: Do not buy a new car.  

As I’ve said before, a new car is a colossal waste of money (whether you are 22 or 60) given that most new vehicles depreciate an average of 45 percent in the first three years!  Take the bus or mass transit or look for a bare bones used car that has basic safety feature like stability control, airbags, ABS, etc.

4: Pay for things in cash and if you don’t have cash then don’t buy it.  

This tip is really about controlling how you use your credit card.  It’s ok to have one and use it but be sure to pay off the full balance each month (this will actually help you build a good credit score so that when you go and buy a house you’ll get a better mortgage rate and don’t have to ask Aunt Peggy for the down payment).

5: Max out your 401K contribution immediately, especially if your company offers a match.  

There’s plenty of data that states that the sooner you start saving the faster your money will compound.  And remember that you’re saying no to free money if your employer offers a company match!

6: Create an emergency cash fund.  

I like to have 6 months of living expenses as an emergency fund, some folks say 3 months but having more money in the bank makes me feel all tingly and safe at night.

7: Take risks with your career / job.  

Now is the time to develop a business or work extra hard at work and demand more responsibility.  Just think, there is really nothing at risk: most new grads do not have a family, mortgage, car payment, etc. so you can let your career or business idea be at the center of your universe.

8: Network.  

Keep in close contact with ex-student friends, professors, etc.  The ex-Prof you had beers with may help you land a job or know of alumni that can help.

9: Think like an entrepreneur and don’t settle.  

Your brain is actually sharper in your early twenties and things like critical thought, logic, and creativity will only worsen with age so think big and try to develop the next great consumer product, web site, information product, non-profit, etc. Oh, on the settling part, if you think you have a certain feeling that you would be good at something, but see a direct path to be a lawyer or teacher don’t settle for a teaching gig, for example, just because it’s safe.  Anything that’s worth something requires failure and not settling for mediocrity (nothing against lawyers and teachers!).

10: Delay getting married and starting a family.

This one may be subjective, but I don’t see any reason to rush into getting married and starting a family.   If you get married you’ll need your own place and kids are often a close second (and those little guys require $$$

Are there things I’ve missed or that I’ve gotten totally wrong?

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  • http://www.payingforretirement.com thomas

    College is where the debt usually begins and it’s important for parents to beat financial knowledge into their children before living on their own.

  • http://www.scordo.com/blog Vincent Scordo

    I couldn’t agree with you more, Thomas.
    Vince

  • FrugalPod

    In the intro you mention that the first few year after college predicts someone’s financial future.
    I couldn’t agree more. For most of us who are in their later 20s or early 30s, we know (either first-hand or by watching others) that the choices made in years can drive our finances.
    One of the biggest things is that by spending more than necessary you miss out on the long-term benefits of growth of investments through compounding.
    So by spending too much (and often having debt to pay off for even more years) you are getting hit by both the debt payments for several years and not getting the investment growth in retirement plans.

  • cherryblossom

    I think 7 is interesting. Mainly cause it relates to my position in life right now.

  • http://www.scordo.com/blog Vincent Scordo

    Yeah, really go after what you want (this is a rare time in your life and you should really go for it)!
    Vince

  • http://www.scordo.com/blog Vincent Scordo

    Hi Frugal Pod,
    Yes, compounding is a wonderful thing! Debt is bad at any age, but especially early on because it’s when you build habits and you want to have good, financial habits for your entire life!
    Vince

  • http://www.scordo.com/best-of-top-posts-scordocom-practical-living-how-to-saving-money-personal-finance.html Scordo.com

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  • Vern M.

    This is a great list of sound financial tips, but there are things you can do even before college to start preparing yourself for a stable financial future (at least as stable as you can make it). Basically, planning for methods aside from loans to pay for the extreme cost of a university diploma is the best possible endeavor a prospective student can undertake. Since there’s so much more to paying for school than just tuition, every single dollar you can source that doesn’t need to be paid back is worth almost twice as much as each loan dollar.

  • Sara

    I graduated 2 years ago and most of this information couldn’t possibly be more wrong. I think that what’s more important that settling down immediately is exploring and learning about yourself. In the current economic and political situation, I find your advice to be very irrelevant since most young people are struggling to find full time jobs, let alone part time jobs that don’t require living off of tips.
    One of the most important things you failed to mention was being sure to invest in some form of health insurance, be it a state sponsored program or private. One accident and 5 days in the hospital put me more than $90,000 in debt–WITH insurance! How could any of this advice possibly work for someone in my situation?

  • Vincent Scordo

    Sara, let me try and answer your questions below:
    >I graduated 2 years ago and most of this information >couldn’t possibly be more wrong. I think that what’s >more important that settling down immediately is >exploring and learning about yourself.
    If you read the tips closely, I’m actually not suggesting you “settle down.”
    >In the current economic and political situation, I >your advice to be very irrelevant since most young >people are struggling to find full time jobs, let >part time jobs that don’t require living off of tips.
    Even more reason to live at home until you’re able to find a full time job.
    >One of the most important things you failed to mention >was being sure to invest in some form of health >insurance, be it a state sponsored program or private. >One accident and 5 days in the hospital put me more >than $90,000 in debt–WITH insurance! How could any of >this advice possibly work for someone in my situation?
    Good point about insurance. Ultimately, Sara, you’re the only one who truly understand your personal situation, so you need to make decisions that work for you and not via my tips above.
    Thanks for writing
    Vince

  • http://lifetofullest.com Jay@ Life to Fullest

    I have read a lot of stories, tips, quotes about life and living it to the fullest and this one stands out. Others say that one of the hardest questions in life is about “life” itself and how to have it to the full but if we think of it deeply it will only come down to one thing “choice”. Living life to the fullest is a choice. We live the way we want it if we chose to. Some of us are just complicating life. Great post. More power to you.

  • http://entryleveldilemma.blogspot.com Edward

    look for a bare bones used car that has basic safety feature like stability control, airbags, ABS, etc.
    I wouldn’t consider those basic features of a bare bones used car. Maybe if you limit yourself to something built in the last decade, but there are a lot of older reliable cars on the market for a lot less than you’ll find for a newer used car.
    Between the initial purchase, maintenance, and repairs, I’ve just barely spent $4,000 on my 91 Camry, and it still has at least 5 years left in it.
    I also disagree that your spending after college necessarily dictates your financial future. I was originally a mess, but then I got on track, and I will be credit card debt free by 2012, possibly 2011.

  • Vincent Scordo

    ABS and, at the least, front side airbags are pretty common even in late model vehicles (say from model year 1995 onwards).
    Stability control will be standard in all vehicles come 2012, I believe (it’s actually a new standard the federal government has set for all OEMs).
    I suppose a bare bones vehicle is relative for all car buyers. Stability control, ABS, and airbags save lives and, in my view, are vital (I would not let my children, wife, or myself drive a vehicle without these vehicle features).
    Buying a used car is about value and included in value proposition is safety, performance, reliability, etc. (buying a high value vehicle isn’t just about getting the cheapest car that runs).
    On the spending after college item, just think of all the personal finance moves you’re missing out on because you’re still paying off credit card debt. Just because you’re in the process of recovering from credit card debt doesn’t mean you’re ok, you’ve lost time to get ahead (financially) and, in a sense, you’ll alway be behind now trying to catch up. My two cents.
    Scordo.com

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  • http://www.tucsoncharityrealestate.com Dan Thompson

    #8, network, is the most important. It’s not how you do in life, its who you know in life.

  • http://www.stainlesssteelfrypanguide.com suzanne llanera

    I really like your tip on “paying in cash”. Yes, I once was just paying the minimum balance and every month, I get an interest of around USD $100!!! This was a big amount for me..so I tried to finish all my debts and paid it off for 2.5 years….now, what I do is–I still use my credit card, but , the moment I get home, I have a small purse wherein I immediately “pay” the amount of what I bought.There are several advantages of this: 1) when credit card payment comes, you have ready money to pay 2) you have an emergency cash at the house 3)you get to use your card and earn points–whether as reward points or mileage points. So..its simply, you maximizing and “using” your card and not the bank/credit card using your money

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