Finance Advice for New College Graduates

Wesley Watkis

Recent college graduates stand poised to begin a lifetime of smart financial decision-making. It doesn't matter whether you're graduating with a technology degree and no student loan debt or a teaching degree and debt that runs into the tens of thousands of dollars - now is the time to set the tone for your entire life.

Don't Get More Debt: Many graduates go from having no income to suddenly having a large income, and the result can be a bit of a spending spree. It's easy to take on a new car payment or run up credit card bill if you're suddenly faced with a larger monthly income than you imagined. However, this is not the time to run up any debt. Income isn't guaranteed - especially in this economy - and getting into the habit of spending everything you make is a hard one to break later on.

Select a Career for its Long-Term Viability: The lure of a six-figure salary is pretty strong if you're a recent graduate, but don't take a job just because it offers a lot of money. Changing careers to something you're more interested in - whether you do it in six months or six years - is a very costly affair, especially if you have to go back to entry level work after being accustomed to being the boss. Working your way up in your dream field is the smartest move, even if that means making less money now.

Pay Off Student Loans ASAP: Put as much additional income toward your student loans as possible. Student loans have a tendency to linger for up to 20 years. If you want to avoid making payments through your 40s, its best to start putting money toward the student loans while you don't have things like a mortgage, car payment, spouse, or kids.

Start as You Mean to Go On: Unless you see yourself living paycheck to paycheck in the basement of your parents house ten years from now, don't start doing it now - or ever. Although it might seem easier to live at home while you save money and build your career, it's a better idea to live on your own and get in the habit of budgeting your income, no matter how small it is. Most people don't realize it, but financial responsibility is a skill that takes years of practice to master.

Start a Retirement Plan: It may seem a bit silly to start planning for retirement beginning with your first day of work, but there's no better time to start earmarking your funds for future use. If your company offers a 401(k), contribute to it. If your company doesn't, look into IRA and brokerage account options. Putting retirement money away right now will not only create a larger savings for your future, but it might also allow you to retire ten or even twenty years earlier than your counterparts.

Perhaps the best financial advice for recent college graduates is to develop a relationship with a financial advisor or broker. It's always a good idea to know someone with a sound, working knowledge of the financial world, even if you aren't yet ready to make a big investment. You can discuss the possibilities for investments in the next one, five, or ten years, and start creating a budget and lifestyle that will provide the best possible outcome for the future.

Questions? Email me at and visit our website at New Money Talk is a weekly article focusing on retirement, personal finance, and estate planning.
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