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When you graduate from college, there is so much to celebrate. Not only have you completed your higher education, but you now have all the tools needed to start a career, build wealth, and invest in your future.
Many new graduates learn so much about their respective industries, but, unfortunately, their financial education can be lacking. For that reason, we’ve compiled our top money tips for new college graduates below.
When you get your first job, you’ll most likely go through the process of getting acclimated to your company, meeting with human resources, and hopefully, setting up your retirement account. Because many college graduates start with lower salaries, they feel as though they need as much cash as possible. So, they only place a small percentage of their income in their retirement accounts. However, this is a mistake. It’s better to start out by allocating a high portion of your check. That way, you get used to living on the numbers from your check right from the start, and you can adjust your lifestyle, budget, and expenses to accommodate it.
Many employers will match your retirement contributions up to a certain percentage between 1-5%. This is free money that you should absolutely take advantage of! Make sure that you speak with your human resources representative if you have difficulty understanding how it works. It can be confusing. It’s better to ask as many questions as possible in the beginning, then to wonder what happened if it didn’t work out like you thought in the end.
College students are known for living on cheap drink and ramen noodles (and if they’re lucky, maybe a little bit of pasta and spaghetti sauce.) So, it’s no wonder when they receive their first jobs, they tend to over-inflate their lifestyle. It’s tempting to get a new car or buy your first home right when you accept your first job. However, we recommend waiting about 6 months just to make sure you enjoy your career and want to stay with your current company before making lavish decisions. After 6 months, then you can decide whether you can afford to make any upgrades to your lifestyle.
It’s okay to live with your parents, but only if you are saving your money to an extreme degree and you have goals. For example, if you are saving to buy your first house, that’s a good reason to live with your parents. If you are saving for your wedding or your future with your other half, that’s another good reason. It’s not a good reason to live with your parents if you don’t have a job or don’t want to find a job. Only use the generosity of your parents to help build your financial future, not to place a burden on theirs.
When it comes to being financially literate, it all comes down to understanding your balance of spending, saving, and sharing. Don’t feel like you have to contribute to every joint gift at work or participate in every Starbucks coffee run. At the same time, know how you want to allocate your funds. A good balance of spending, saving, and sharing can not only give you a great nest egg but it can allow you to donate to causes you believe in all while spending on the things you need and occasionally want. In order to find this balance, it’s important to budget and track your spending, and once you get the hang of it, you’ll be well on your way to financial wellness.