When I graduated from college, I thought I knew a lot. I knew how to do laundry, how to feed myself and save money at the same time, and how to interview well. All very valuable things you need to know by the time you graduate from college, or so I thought. While I wouldn’t know it at the time, the journey to becoming a completely self-sufficient adult had a few bumps and a lot of learning experiences. Knowing how to meal plan and interview well for jobs is important, but one thing you’re rarely taught is how to approach and handle your money after graduation. For all of the recent graduates out there, I hope this money advice comes in handy, doesn’t scare you, and makes you hustle a little harder. It’s not always easy going from the comfortable, reliable college life to life in the real world, but it’s a ride you certainly won’t ever forget!
Save Money Right Away
You likely weren’t able to save much money in college, and if you did, it was likely very little. Now that you’re out and starting a new, full-time job, you need to increase your savings rate as soon as possible. A good rule of thumb is to save 10% of your pre-tax paycheck. If your company offers a 401(k) or similar investment vehicle, work with HR to set up an automatic deduction of 10% of your salary into the company savings plan. This is even more important if your company matches your investment – you cannot pass this up! Saving 10% of your salary may seem daunting at first, especially since you’ve probably already spent your first paycheck in your head. Trust me, the sooner you start saving, the easier it gets. You really won’t miss that 10% after a while, and as your balance increases annually, you’ll be even happier you setup your account at the beginning.
Keep Eating Like a College Student
If you’re like most college students, you probably subsisted on sub-standard food, eaten at weird times of the night, washed down with cold, black coffee. Now you can definitely upgrade your food quality and your coffee beans, but consider eating as sparingly as you did in college. Eating smaller meals and conserving on the amount of food you purchase at the grocery store will save you money. Meal planning and stretching what you eat is one of the best ways to save money. You’ll quickly notice many of your colleagues eating out every single day for lunch – if lunch costs $10, that’s $50 a week going out the door! Splurge occasionally, but make meal planning a staple and saving will come much easier to you.
Always Be Looking (ABL)
Even if you love your job, keep an eye on what else is out there. Looking at job boards, your friends’ LinkedIn pages, and industry job postings online will at least give you an idea of what interesting opportunities are available. By keeping an eye on jobs in your field, you’ll eventually notice trends. Is your field prioritizing a new skill set or new software knowledge? Consider getting training at your job to stay ahead. Have salaries in your field increased, while yours is staying stagnant? Depending on how long you’ve been at your job, and the work you’ve done, you may be able to ask for a raise. On the darker side of ABL, you never know when you’ll want out. I’ve seen fellow coworkers love their jobs, only to get a new boss who makes their formerly-awesome job a terrible, soul-sucking experience. If you’ve already been looking, you’ll at least have a headstart over others who are just trying to understand what is out there. Best yet, by always looking and staying ahead of new advances in your field, you’ll make yourself so much more marketable. A driven, talented person who is always looking to improve will go far in their career – whether that’s working for someone else or yourself!
Avoid Lifestyle Inflation
You may have already heard of lifestyle inflation, where your lifestyle spending increases relative to your wage. After college, the allure of increasing your lifestyle certainly seems to make sense. After all, why keep taking the bus, which is crowded and dingy, when you can now afford a car? Why not upgrade your clothing to reflect your new position? Why not spend more money on that weekend beach trip? There are very few instances when lifestyle inflation makes sense. They include:
- Upgrading your wardrobe – if you lived in t-shirts and jeans during college, as I did, and are now going into the corporate world, you must spend money on better clothes. Yes, suits and tailors are expensive, but they last a very, very long time. The pant- and skirt-suits I bought at graduation are still serving me almost 5 years later, making their approximate $500 total price tag well worth it.
- Better living arrangements – Some people are not going to agree with me on this, but hear me out. If you’re living in a roach-infested apartment with 2 roommates who keep odd hours, making it hard for you to get enough sleep at night, you should probably spend a little more for some peace and quiet. Same goes for if you’re afraid of being robbed or attacked while walking home in the dark. And yes, I’ve lived in places like that. $300 a month rent, while nice, isn’t worth being followed home by strange individuals. Trust me.
Other than basic-yet-professionally-required wardrobe investments and safety concerns, there are very few other reasons to increase your lifestyle. Yes, having the latest and greatest technology is cool, but that’s what savings is for! The great thing about a steady paycheck is that things you want can eventually be yours, including the latest gadgets and a well-funded retirement. It just takes patience.
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To all my fellow post-graduates out there, what money advice would you give to new graduates? Is there anything I left out that you think should be mentioned? Share it in the comments below!
Warren Lee says
Melissa, you’re advice about eating like a college kid is on point. A few extra nights out at restaurants can add up quick. It’s the little things that chip away at our finances. You don’t need to overspend on a vehicle to make a very bad financial decision. In fact, continuing a series of smaller yet detrimental financial decisions could be worse because it becomes a lifestyle.
That’s so true, Warren! It’s easy to justify going out, or spending here and there, because you really don’t realize those $5, $10 expenses add up to hundreds, literally hundreds, of dollars each month. It’s not “fun” to stay in every night, but it’s less fun to rack up debt every single month. Thanks, Warren!
Thomas @ i need money ASAP! says
Lifestyle inflation is a killer. I experienced quite a bit of that after getting my first job. New car, motorcycle, my own apartment. It added up quickly. My spending increased so much that I actually didn’t have enough to save each month. Over time I’ve been able to cut back but its much easier to avoid lifestyle inflation all together.
It’s definitely easy to fall into the lifestyle inflation trap, especially if you’ve been living like a poor college student. Glad to hear you’ve been able to cut back but yeah, never falling into the trap in the first place is the way to go! Thanks, Thomas!
Cash In A Snap says
It is always the best thing to invest in education. Now it is important to learn how to be financially responsible. Student loans are the main cause graduates are in debt. Keeping debt under control is a must! Use a part of your paycheck to clear you debt as early as possible.