Financial Advice for New College Graduates

Graduating from college is a huge achievement. There’s a lot to celebrate: No more classes, no more exams and hopefully much more money. But part of bringing home a larger paycheck is figuring out how to spend it wisely. Establishing strong financial habits now can be your first step towards financial independence in the future. We’ll let you know how to budget money after college while setting yourself up to make even more.

Top money tips for college grads

Financial advice for recent graduates tends to be obvious: spend less, save more. While this seems simple enough, there are strategies that can actually make it a reality.

• Negotiate your salary Even if you don’t have years of experience under your belt, you still have some leverage when discussing your starting pay. You’ve invested in an education and holding a college degree can result in higher compensation. Calculate the cost of living in your area and bring that to the table as rationale for your salary requirements. Financial planning after college starts with securing a salary that will cover your basic needs. Glassdoor is a good place to find salary ranges for different jobs, companies and cities.

• Don’t rent outside your means
  Housing is a huge expense and could determine your budget overall. Don’t expect to live the dream right out of school. If you need to live with family or friends for a bit after graduation, know that you’re not alone. Currently, around 47% of young adults between 18 and 29 live with their parents.¹
  
  The old adage is that you should spend no more that 30% of your total monthly income on housing.² That said, housing costs vary regionally, and your long-term career goals may trump access to affordable rent. As long as all of your expenses are accounted for, where you spend your money is up to you. Read on to learn more about how to budget after college or get more info on how much you should spend on rent.

• Create a budget
  Creating a budget for the first time can be an empowering experience. Knowing you have the money set aside for a night out or a nice outfit may help you enjoy those purchases more. The 50-30-20 rule is a good goal to strive for: after taxes, allocate 50% of your income on needs, 30% on wants and save 20%.
  
  If you have debt, you may want to devote some of that 20% savings to student loan or credit card payments. Find out the interest rates for all of your debt and pay off the highest first. This is known as the “avalanche” method. That may mean paying the minimum on debts with lower rates while you reduce the balance on your most expensive debt.

• Create a plan to pay off student loans (if applicable)
  Most student loans have a grace period of six months after you graduate.³ Take advantage of it. If you aren’t able to afford payments after the six months, you may be able to defer or reduce your payments further by providing income documentation. As long as you communicate with your student loan servicer, you should be able to build a repayment plan that works for you.

• Establish a retirement savings plan
  While it seems strange for retirement to be a part of financial advice for recent graduates, it is essential. If your employer has a 401(k) retirement plan, sign up for it and start investing a small percentage of your paycheck. It’s even better if your employer matches your contribution. It’s essentially free money, so don’t miss out.
  
  If your employer doesn’t offer a 401(k), consider an IRA which you can open with a bank or brokerage. Some people even invest in both. Learn about how to compare a 401(k) and an IRA as well as more smart money moves to make in your 20s.

• Build your credit
  Your credit is referenced for just about everything, from auto loans and mortgages to apartments, utilities, and even a cellphone. One of the easiest ways to tank your credit score is to carry a large balance on your credit card without a large credit limit, so make sure you never max out a card. Explore credit cards specifically for new graduates and young people if you are new to credit entirely and always use them responsibly.
  

• Set your financial goals
  Now that you know the basics of financial planning after college, you can begin to set personalized goals to keep you motivated. Do you get anxious if your savings isn’t growing with every paycheck? Do you want a hearty side-pot for vacations and adventures? Consider some of these personal finance tips for recent grads:

  • Download a savings app - Apps like Acorns and Qapital help you set aside and invest small amounts of money that add up over time.
  • Imagine losing your job - How long will it take to find a new one? See if you can put aside 3 to 6 months of expenses as an emergency fund.
  • Plan a done-with-debt celebration - Keep a reward in mind and treat yourself when you reach a milestone like paying off your credit card.

  You’ve got this

  Getting your financial footing can seem overwhelming at first. But you graduated from college. That wasn’t easy either. All it takes is a little planning, some determination and an eye on a comfier, wealthier future.

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  1. “How 'boomerang kids' who moved back home show the ... - CNBC." 10 Jan. 2022, https://www.cnbc.com/2022/01/10/young-adults-with-rich-parents-are-more-likely-to-boomerang-back-home.html. Accessed 19 Apr. 2022.
  2. "Here's how much of your income you should be spending on housing." 6 Jun. 2018, https://www.cnbc.com/2018/06/06/how-much-of-your-income-you-should-be-spending-on-housing.html. Accessed 19 Apr. 2022.
  3. "How to Consolidate and Refinance Your Student Loans - NerdWallet." 14 Jun. 2021, https://www.nerdwallet.com/article/loans/student-loans/consolidate-student-loans. Accessed 19 Apr. 2022.

  This article has been updated from a previous posting on May 11, 2021. Jessica Leshnoff contributed.