Money Advice for Soon-to-Be College Grads

by Emily Guy Birken on March 27, 2013

College StudentOne of the biggest financial mistakes I ever made was during my senior year in college. I was having trouble paying off my credit card each month, and so I decided I could let myself get into a little bit of debt, since I’d be working a “real” job after I graduated and could take care of my credit card then.

Of course, that turned out to be far from the truth. It took me three months after graduation to find the bookstore job that I would hold for the next year, and the $2,400 I carried on my credit card took another year after that for me to fully pay off.

It’s easy for college seniors and new grads to get themselves into financial trouble, even if they’re entering into a great new job. So here are the lessons all college grads should internalize, before they’ve walked across the stage:

Beware of lifestyle inflation.

Congratulations! Your new job is waiting for you and your starting salary seems like an enormous amount of money.

But before you start making it rain, remember that expenses seem to expand to the size of the paycheck. The salary that makes you feel like you’re rolling in it today can soon feel like hardly enough to make ends meet—if you let it.

Rather than allow your expenses to overwhelm your paycheck, plan on continuing to live like a college student. Yes, you can improve your ramen-and-Diet-Coke diet, but overall, you don’t want to drastically change the way you spend money. This will not only get you used to living within your means (which is the secret to growing wealth), but it will also give you the financial flexibility to start paying down debt or otherwise meet your big life goals.

Auto-debit is your friend.

One excellent way to make sure that you are controlling your money, rather than letting it control you, is to judiciously use auto-debits. Start with your student loan. Set up an automatic transfer (preferably on your payday if your lender allows flexibility) so that you know your monthly student loan bill will be paid. Most lenders will offer an incentive, like subtracting a quarter of a point interest, if you sign up for their auto-debit program.

While you’re at it, make your contribution to your 401(k) automatic. If your money is deducted before you even see it, you’re less likely to miss it, and your future self will certainly thank you for getting a jump start on your retirement savings. Make sure you put enough aside to get your company’s matching amount.

Finally, don’t forget to pay yourself. It pays to have a healthy emergency fund, and if you do an automatic transfer of some of each paycheck into a savings account, you’ll soon have a nice little fund for emergencies (or future down payment).

Make plans.

One of the reasons why it is so easy for young grads to go overboard with newfound money and freedom is because they don’t have anything in particular that they’re planning for in the future. So, sit down and think about what you hope to do with your life. Do you want to buy a house someday? Do you dream of traveling around the world? Do you think about going back to school for an advanced degree?

If you don’t know what you want, it can be hard to save for it. So think about where you hope your life will go. Obviously, you don’t have to follow the plan you put together at 22 if circumstances change. But having a plan is a much better idea than simply living without one.

The Bottom Line

Life after college is a wonderful time. For many young adults, it’s the first time you really feel like the master of your fate. But it’s possible to enjoy this time without getting yourself into financial trouble. Just make sure you remember to plan for the future while you’re enjoying the present, and your money will serve you well.

This article is contributed from Cash Money Life, where Emily Guy Birken is also a contributor.

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Emily Guy Birken

Emily Guy Birken is a freelance writer and stay-at-home mom who is passionate about personal finance. She lives in Lafayette, Indiana with her mechanical engineer husband and her toddler son. She blogs about parenting at The SAHMnambulist and about the funny side of money at Live Like a Mensch.

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