7 Basic Financial Tips Every Recent Grad Should Use

Cut Down On Spending

Cut spending anywhere you can – within reason. For example, skipping showers and laundry days to lower your water bill is probably not the best way to save money (unless your plan is to get so dirty that people offer you cash bribes to get you to bathe)! There are plenty of practical steps you can take to reduce your expenses. Here are a few of our favorites:

• Move back in with your parents. I know this isn’t the most appealing tip. At this point most of us have gotten used to some level of independence and privacy, but moving back in with your folks will cut down on housing costs, which can make a big difference in how much money you’re saving monthly. The money that you’re not spending on rent can go toward your savings and reducing any student loan debt you may have racked up during your years in college.
• Avoid takeout or going out for dinner with friends too often. You should still allow yourself some spending money, but going out for dinner multiple times a week is going to destroy your budget.
• If you don’t want to sacrifice your social life too much, consider drying out and skip the drinks from time to time. You don’t always need alcohol to have fun with your friends right?

Reduce Your Debt

Reducing your debt means less money coming out of your pocket every month, which means you can start saving for more important things – like a home or your retirement fund.

• Pay off any credit card debt you have, and then ditch the habit of charging everything on your plastic. Credit cards may be alluring, but it’s important to avoid purchasing anything unless you have the money on hand.
• Reduce loan debt as quickly as possible – If you can scrimp and put just an extra $25 a month towards debt payments, you’ll be amazed how quickly your debt will begin to shrink.

Start Investing

It’s never too early to start thinking about your future. Don’t think of it as just another option to save – consider it as paying yourself. After all, the money you make from investments will ultimately go to you. You’re paying yourself before you pay anyone else.

• Take advantage of your employer’s 401(k) or equivalent retirement plan. Try to match whatever your employer’s offer is. Most employers require workers to save between 4-6% in order to qualify for a full match.
• Invest in stocks or mutual funds, and remember that starting early means plenty of time for your money to grow. Don’t feel like you have enough information to take this step? Learn the basics about stocks, bonds and mutual funds from resources and guides like this one from Forbes.

Don’t Touch Invested Money

Leave your investments and 401(k) alone. That money is supposed to be for retirement and dipping your hand into those funds early can carry heavy penalties. Consider that money entirely untouchable and off the table until the proper time has come, or you’ll find yourself lacking money when you really need it later down the road. Instead of turning to your 401(k) in times of trouble, build an emergency fund, and then you can pursue short-term investments later if you choose.

• If you attempt to withdraw $50,000 from your 401(k) early, you’d only end up with around $32,000, since a large chunk of your withdrawal would go to covering the early withdrawal fee and taxes. Is losing $18,000 worth getting your money out early?
• Stockpile any spare money to create an emergency fund. You want a fund large enough to cover 3-6 months of living expenses in case of an emergency like losing your job or having a sudden large expense like replacing a vehicle.

Keep Learning

Just because you’re out of school doesn’t mean that your education is over. The job market is more competitive than ever, and the more job skills you acquire, the better your chances are of being able to find and keep employment that actually pays a living wage.

• Learn more about your job and the industry you’re in; furthering your knowledge about your employment industry can give you a competitive edge.
• Investing in yourself and your education can come in a variety of forms. You can start learning a new language (including code), study a new trade, or simply read an educational book. Bettering yourself doesn’t have to happen in giant steps. You just want to make sure that you are constantly progressing.

Build and Protect Your Credit

Having good credit is important to a lot of steps you’ll be taking in the next couple years of your life. Want to buy a house in the next couple years? First you need credit.

• Pay your bills on time. Not only is this just good practice, you’ll avoid any late fees and also build your credit up.
• Your payment history contributes 35% of your credit score, so paying on time is imperative for building credit. One missed payment not only comes with late fees attached, but also a giant dip in your credit score.
• Try not to spend over 30% of your credit limit.
• Check your credit score at least once a year.

Create Your Budget

Knowing how much money needs to be allotted to cover all your expenses will make money less of a concern for you in your daily life. You have enough stress to deal with without worrying that your paycheck won’t last you until the next pay cycle.

• Make a list of all the expenses you have, such as your cell phone bill, utilities, cost of groceries and how much it costs to fill your car.
• Create a list with set amounts of how much money you need to cover each expense, and stick with it. If your allotment for entertainment is $40 a week and you’ve already hit that limit, skip going to the movie with your friends. You’ll be grateful for it when you’re not completely broke. No one wants to live paycheck to paycheck.

You Can Do It

Making a conscious effort to cut spending wherever you can and invest saved money is a big step in the right direction towards a successful future. Not only will you have less money worries, you’ll also benefit from your frugality later in life when you have enough retirement funds. Follow these tips to create a solid foundation for the rest of your life, and if you need more help with your credit or with managing your student loan debt, remember that we are here.