5 Practical Financial Tips for Recent Graduates

Alecia Decker |

It’s college graduation season so we wanted to share our favorite tips for recent graduates to help ensure you lay a strong financial foundation. As you step into adulthood, it’s crucial to have a plan for your finances based on your future goals, even if they aren't crystal clear yet. Time goes by quickly, and the sooner you start saving, the better off your finances will likely be. 

Our biggest piece of advice is to view saving money as a habit. Just like spending can become a habit, so can saving. The earlier to adopt this habit, the stronger your financial position will be in the future.  

Here are some other tips you should apply to your finances: 

Tip #1 – Create a Budget

Creating a monthly budget to track your income and expenses will help you use your money more wisely and spend less on discretionary items. You’ll need to figure out what you’re spending and then create a budget with goals. Focus on necessities first – rent/mortgage, groceries, utilities, and student loan payments. Then set aside a portion for your savings account and another portion for discretionary spending or “fun money.”

Tip #2 – Manage Your Debt

Between student loan payments and credit cards, aim to control your debt as much as you can. If your student loan payments aren’t manageable, explore options like income-driven plans or loan consolidation to help with this monthly cost. Avoid leaving a balance on high-interest credit cards to avoid paying high-interest payments; The standard interest rate is close to 30% of your balance, which will compile very quickly with time.

Tip #3 – Start an Emergency Fund

Financial emergencies are inevitable – we all face them from time to time. Whether it’s an unexpected vet bill, a broken water heater, an unplanned trip to the emergency room, or you’re surprised with a layoff from your job, it’s imperative that you have funds set aside to help you when these unforeseen expenses arise. Consider automating a set amount of money each payday from your checking account to your savings account, where your emergency fund is housed, to help grow this fund. A good rule of thumb is to have at least three to six months of living expenses saved in case.

Tip #4 – Start a High-Yield Savings Account

The earlier you start saving money, the more flexibility you will have in the future. We strongly urge new graduates, and people of all ages, to get in the habit of saving a portion of their money right away. We recommend opening a high-yield savings account due to their advantageous interest rates upward of 5%. These accounts will allow for more growth compared to the typical savings account with a much lower average interest rate of less than 1%. Allocate a comfortable amount of money that works with your budget to this account each month. This will allow you to grow your savings account over time while still buying some of the items you want. 

Tip #5 – Invest in your Company 401(k) -- Even if It’s a Small Amount

In most cases, investing in something is better than investing in nothing. Workplace retirement plans can offer you a convenient way to start investing for your retirement, and many times, they even offer to match your investment by a certain percentage.  Although having all the money in your pocket today sounds nice, you’d be surprised at how much you can save by investing even just a small portion of your paycheck.

Starting early and making regular contributions towards long-term financial goals cannot be underestimated. Applying these tips when you’re younger will help set the foundation for your future and help you pursue your lifelong goals.

Contact us to learn how we can help you lay a strong financial foundation for your future.