Money Tips for New College Graduates – Spending, Saving, & Budgeting Advice
May 10, 2008
What college student do you know that isn’t cheap? When you’re in school every penny counts and you learn to manage your money on a very tight budget. Saving money simply becomes second nature to you. I was so cheap in college I used to:
-Wear every last piece of clothing to delay paying for the laundry
-Ride my bike everywhere so I wouldn’t have to pay for gas
-Keep the heat turned as low as possible
-Eat breakfast in the dark to save on the electric bill
-Use water on my cereal so I wouldn’t have to buy milk
–Buy the cheapest beer possible, no matter the taste
-Eat the cheapest food possible, rice & beans almost every night
Any of those sound familiar? I’m sure you could give many more examples of ways students save money. The question is, now that you’re finished with school do you still have to live like a broke college student?
Making Money
Once you start your first job you may feel like you’re rolling in the dough. You go from making zero money to earning a regular income every payday. Although it may not be much, it’s a lot more money than you’re used to having. As my parents used to say, your money may be “burning a hole in your pocket”. You’ve been scraping by for years and now you may be eager to buy the things you’ve needed or wanted but couldn’t afford. Before you go out and blow your new income on a shopping spree think about the following story.
Starving for Money
A man is rescued from a desert island after four years of surviving on nothing but coconuts and fish. He’s taken to an all you can eat buffet and gorges himself on the food he’s dreamed about for the last 48 months. His body goes into shock at the massive amount of food he’s taken in. He becomes very ill, his bodily systems shut down, and he almost dies from the health repercussions.
See any parallel there between that guy and a new college graduate who finally earns money after 4 years of being broke and goes on a spending spree? Of course you won’t die from overspending but you can literally kill your financial future for years to come if you go on a buying binge.
One of the greatest assets you have as a recent college graduate for building your financial future is the value of compound growth over the next several decades. How you choose to spend, save, and budget your money now can determine whether you struggle with money for the rest of your life or have the financial freedom that many people only dream about.
Your Financial Future
If you’re a single adult earning a salary your options for building wealth are pretty promising. You don’t have to support anyone else. Your money doesn’t have to pay for diapers, engagement rings, or your spouse’s credit card bills. You don’t have to discuss with anyone how you’re going to spend your money or why.
Your money is all yours to do what you wish, just don’t blow it. You likely won’t always have this kind of financial freedom so spend your money wisely now. Here are some tips on how you can maximize the amount of money you keep in your pocket.
Avoid buying that brand new, flashy car. If you believe it is a good investment, realize that just driving it off the car lot decreases it’s value tremendously. Additionally, use an auto loan calculator to show you just how much you are paying for the car with interest included.
Avoid expensive rent. Do you need to live downtown in that luxury apartment? The fact is, that’s cash you are spending that you may not need to. Look for a lower end apartment that fits your needs and pocket the rest of your money.
Do think about cheap real estate options. With the real estate market so affordable right now, chances are good you’ll be well on your way to making a sizable investment long term if you buy now.
Look for a roommate. Sharing the expenses of owning a home or renting an apartment is a great way to save plenty of money.
Avoid credit card debt. While credit cards can be a good financial tool if used properly, they can also get you into a lot of trouble financially if you abuse them. In a later article we’ll cover some of the best credit cards for college graduates.
Managing Your Money
In addition to saving money on your biggest expenses like cars and rent and avoiding credit card bills, there are a few other key points to managing your money. You’ll want to simplify things by following a system to plan and track your spending. You’ll also want to protect yourself also unforeseen events with an emergency fund and insurance. Here are some details on these money tips:
Create a monthly budget and stick to it. Figure out how much you’d like to spend, how much you need to spend, then find a happy medium. Be realistic, don’t create a budget you won’t follow. Use your mobile device to record your spending and use software like Quicken, or even a simple spreadsheet, to track and analyze it. Watch out for things like eating out, bar tabs, and buying gadgets those add up faster than you realize.
Build an emergency fund available to you in an easy to access savings account. Use these funds instead of a credit card when you need money. Open an online savings account with ING Direct or Washington Mutual. Setup a direct deposit to start building up your fund right away.
Use online banking to stay on top of all of your balances and to know where your money is really being spent. You can download your transactions into your financial software to make tracking your spending easier.
Buy health insurance to protect you from catastrophic expenses and medical debt in the event of a major health issue. Make sure you have adequate auto insurance to cover your liability in the event of an accident.
College Graduate Finances
Leaving university for a job in the real world is a pretty exciting time. The money that comes with a job is nice after being a poor student for years. If you can combine the frugal tricks and habits you learned in college with the spending, saving, and budgeting tips we’ve covered you’ll be able to have fun with your newfound cash and still build a financial future for yourself.
For more financial advice for college graduates see the articles below:
All posts by Ben Edwards
Here is a good resouce for some info on how to get out of debt, more specifically student loan debt in Canada. This company offers free advice of student loan debt and is totally Credible. check out nomoredebts.org . Hope this helps!
Monty, I think you’re right when you say “Emotion and logic may clash”. It’s one of those things where you really want to finally go spend some money but you know the smart thing is to hold off.
I can imagine that a new college graduate might have some impatience after spending 4 years of their life at gruelling studies. They want to experience life and feel deserving of what is out their.
Common sense would say that a student needs to take it slow and sure when they get out of college. Start to make some money and make small purchases as you build up your new house hold.
Emotion and logic some times may clash in this area.