When I graduated college, I felt excited about my future. I was so ready to be done with school and finally be an “adult”. Being in school was the last vestige of being a kid and it was time for me to fly and soar into the “real world.”
While I was more mature and had some work experience under my belt, I didn’t really understand the steps I should take financially to prepare myself for the real world. All of a sudden I wasn’t living with my parents and didn’t have student loans to rely on to pay for everything.
It was a rude awakening, as I scrambled to get by, with little income and savings. So this advice is for new college graduates looking to getting started on their own two feet (and avoiding the mistakes many of us have made).
Start an emergency fund
As a young adult who’s just starting out, it’s crucial to have an emergency fund. Even if it’s not a huge one, it’s key to have at least one thousand dollars set aside only for emergencies.
I was smart enough to actually have some money saved up — and shortly after I moved out of my parents’ house I got into a car accident and had to fork over nearly all of my savings. But I was glad I had the money in the bank to cover the expense.
Emergencies will happen. It’s not a matter of if, so by saving now, you are helping yourself down the line. The key is to only use this money for emergencies.
Begin investing
When I was young I heard the standard advice: start investing now. But I made every excuse in the book not to start. I thought excuses like “I didn’t know how”, or “I didn’t make enough money” were qualified.
My current job didn’t provide an employer match either, so I let myself believe I could wait to start investing. In my head, I thought I was young and had forever to start investing. Now at 30 years old, I really wish I listened to everyone.
Compound interest is your best friend. You have the beauty of time to really set yourself for success — and maybe even an early retirement.
Check your credit score and report
Now that you are entering the real world, applying for jobs, apartments, and credit cards, there is one number that is going to rule your life: your credit score. Your credit score is essentially an average of your credit history.
In addition to keeping your balances low, pay your bills on time, every time. Failing to do so is a great way to ruin your credit quickly.
Watch out for lifestyle creep
You’ve graduated. You received your diploma and a new spiffy job. It’s time to celebrate! While some lifestyle creep might be understandable — such as eating actual food and not just Ramen, be careful about taking on too much. It’s easy to want to jump in and “play adult” before your finances are ready.
I thought I was so ready to be an adult that at 23, I lived on my own in Los Angeles, while paying back my loans. Looking back, I really should have had a roommate. I was making a nonprofit salary, living on my own and paying off debt.
I made it work, but I would be much further ahead financially if I did like most of my friends and had a roommate. Don’t take on too much, too soon. Learn how to budget for what you want, while also exercising some self-restraint.
Pay more towards debt
If you can afford to do so, pay more than the minimum to your debt. After graduation, I thought my student loan payments were just bills. It didn’t even occur to me that I could or should pay more to my student loans.
For years I simply paid the minimum, when I could have paid more. The sooner you get out of debt, the sooner you can fund your other goals. You will pay so much less in interest if you pay more than the minimum and get out of debt early.
Know your goals
Let’s face it. When you graduate from college, you’re still finding yourself in a lot of ways. You are searching for your career, your friend group, and what kind of life you want to lead as an adult — your own independent adult, not the kid who lives in the shadow of their parents.
At this time, it’s easy to be impressionable and give into peer pressure, advertisements, etc. Figure out what you want and know your goals. This will help your spending priorities so that you can spend on your values and not waste money or time on things that don’t matter to you.
Using these steps can help you avoid some of the mistakes I made time and time again, so you can set yourself up for success and a strong financial future.
