Best Financial Tips for New Grads
Student Loan Debt and Entry Level Salaries
Many college students think if they secure a full-time job with a livable salary, that their financial house will be in order. This couldn’t be further from the truth.
For most students who are fully on their own for the first time right out of college, how they handle their money early sets the tone and habits of how they will handle it in the years to come. It’s critical to start off on the right foot.
Own your student loan debt
Many young adults complain about their student loan debt load or lack of good paying entry-level jobs. Many say they were never told how much their student loans would cost them, so they should be reduced or forgiven.
The biggest reason students struggle with student loan debt is because they somehow decided their situation was not their fault. Sure, there's not enough loan education or proper planning before and during college. However, one's debt is their own fault and assigning blame or responsibility to someone else won't make the problem go away.
The number one best tip for new grads is to own your debt. Agree that it's yours to pay, even if you don't know how you will pay it.
Plan For the Worst, Work Towards the Best
“Play to your strengths,” is advice that’s often given to young adults. While this is good advice in most areas of life, it’s not entirely helpful as a financial tip for new grads.
New grads should be examining their money weaknesses. In many cases, this looks like insufficient income for their education level, high student loan payments, or lifestyle that exceeds income.
When it comes to money, we can’t ignore our weaknesses. Young adults should be putting a plan in place to address each area where they struggle financially.
Once there’s an adequate plan in place, they should be working towards wealth. This is where playing to your strengths comes in. New grads should avoid small thinking.
Small thinking often sounds like this:
“This is the best salary I can get in this city for my degree.”
“I can’t take that job because it doesn’t fulfill my whole life’s purpose.”
“Working a second job is not an option because my social life is more important.”
Working towards wealth, or one’s strengths, doesn’t come easy and it requires overcoming small thinking to reach higher.
Develop a Debt Plan
Hands down, the number one potential financial killer for new grads is debt. Of course, student loans are a growing problem for millennials and need to be planned for before a student graduates. That would be a get out of debt plan.
New grads should take it one step further. They need a stay out of debt plan too.
Students who somehow leave school without any student loans and land their first job frequently turn around and buy a house or a car on credit quickly. Realistically, taking on debt after graduating with none just starts a cycle of debt later than others.
The first year after graduation for a student without debt should be used to develop aggressive saving habits and to stash cash for bigger purchases like a car or house.
There’s No Such Thing as Overkill
Overkill can usually describe instances where someone has done more than expected, but to the extent that the extra outcome was not worth the effort.
Overkill in a new grad’s finances simply doesn’t exist. Overkill can lead to freedom from debt, a healthy savings account, generous living, and a balanced approach to spending.
Areas they should aim for overkill in are:
Resist the Urge to Compare
“The screens of our phones have become mirrors where we constantly check to see if we measure up to others.” – Robert Madu
Isn’t it true that our limited exposure to only the filtered and edited version of our friend’s lives causes us to compare?
New grads will see their friends taking vacations, getting brand new cars, buying homes, and sharing other signs of wealth over social media. The immediate response is to compare oneself to these tiny glimpses of other people’s lives.
Comparison can take us places we don’t want to go financially as we try to keep up with our friends. When it comes to financial success, comparison has no purpose. Nobody has the exact same set of financial circumstances, so sticking to our own budgets, salaries, and goals is the best bet.
Besides, most of your friends are using debt to achieve these symbols of wealth. The average American household in 2015 carried balances of $15,762 in credit card debt, $27,141 in auto loans, and $48,172 in student loans.
Do Your Financial Homework
The real world of work and money is a slightly scary place when a young adult graduates college. It can be tempting to take the first job offer in sight or agree to the first salary offered.
Instead, new grads should be doing their homework in all areas of their finances.
Research what a potential position pays before the interview so you’re prepared when asked for your salary expectations. Throwing out a number without research could make you lose the job or lose thousands over the years.
Compare rates for services like auto or home insurance, Internet services, phone plans, and health insurance.
Start Saving Early
Should new grads start saving right out of college? Yes! Actually, they would have been better off to start saving in high school!
As young adults enter the workforce, they should make it a point to automate their savings immediately to a high percentage, at least 10-15%.
If they start their career saving at that rate, they are more likely to adjust lifestyle to match savings rates, instead of the other way around.
How are you doing in these areas of your finances? Is there anything you would add to the list?
Was this article useful? Hit the Like/Heart button at the bottom of the page if you learned something new.
Get more tips from Optimistic Millennial by signing up for our email list. Don’t worry - you won’t have a full inbox. Pinky-swear.