New College Grads: Make the Most of Your Clean Slate

The following is a guest post by Lauren Bailey, who writes for Best Colleges Online.

So you just recently graduated from college, and now, all of sudden, a whole new set of responsibilities have been foisted on you from the Real World. You were probably mostly on your parents' dime, and so spending money wasn't as much of a concern as it is now. Before, your parents would send you cash, you'd spend however you saw fit, and then you'd hold on tight until next month's allowance. Maybe you even had a part time job that would enable you to splurge on nicer dinners out or drinks with friends.

Once recent grads get jobs, however, we have to start thinking about the ever-elusive future, and that includes investing and dealing with debt. As someone who graduated from not too long ago, here are a few tips.

1. Save at least 10% of your income.

Chances are, as a recent college graduate in today's job market, you aren't making a whole lot of money, although you certainly have much more disposable income than you've ever had before. The first few months of my job, I was astounded by how quickly I went through it all, simply because I wasn't used to having that much money in my bank account. Even if you don't earn very much, saving a mere ten percent is easy, if you're conscientious about it. It's a good start before you begin looking into investment options.

2. Student debt? Try to pay it off as soon as possible, and pay more than minimum.

Most student loans have a six to nine month grace period, allowing recent grads some time to be gainfully employed and get their finances in order before paying back. However, if you find yourself with a job right after college, and you can afford it, start paying immediately. That way, you won't be having to deal with increasing interest rates later on. Most student loans have a very small minimum monthly payment. If you can pay a little more, then by all means do so. The faster you get out of debt, the better.

3. Consider moving back in with your parents temporarily.

I know. The prospect sounds terrible, but if your parents will have happily take you in, and you aren't one who needs absolute privacy, then consider moving back with the family, if only to get a very large jump start on saving and paying off debts. The advantages are numerous, since you'll be paying little or no rent, you'll be tempted to eat out less, and you'll generally be saving a lot. Some may call this free-loading, and certain situations, this may be true, but saving thousands of dollars in rent will enable you to get started on building a nest egg quickly.

4. Look at novice investment options.

While the prospect of investing may seem daunting, especially if you have little knowledge about markets, start looking into it as early as possible. There are several guides online that help young investors navigate the world of stocks, funds, and equities. A great recent article in the Wall Street Journal, Investing Advice for New Grads, asks several experts what would investment options they would advise for novice investors.

Above all, make the most of your youth. As a young person, you can take more financial risks with investing, with the prospecting of larger returns over the long run. You also won't have as nearly as much debt as older folks, and if conscientious about staying out of debt, you can achieve financial security and success much more quickly. Our parents didn't necessarily know about the importance of investing and debt-management when they were our age, simply because there wasn't as much readily accessible information out there. With a little bit of Internet research and a measured amount of determination and will power, you can avoid the mistakes that previous generations have made.

Comments

[Sunil from The Extra Money Blog]

i did #3 and there has not been a better move looking back in retrospect. just a tremendous boost going forward in more ways than one. those who have been there done that know what I am talking about . . .

[Josh]

Great article. 10 percent isn't even very much to ask for. The more you can get in the habit of putting away money for investments and retirement the better off you will be. Many people are taking money out of their retirement to survive right now, and that is unfortunate, but where would they be if they weren't even saving for retirement?

Look into your investment options and make the best decisions you can. There are some very good investment tools that people don't even know about.

[MBTN]

Regarding student debt, one temptation is to ask for a hardship deferral. This is where you ask to stop making payments for a period of time because your income is below a certain threshold. However, the catch is that, depending on the circumstances, interest still accrues on the loan, so that you end up with a bigger loan than you started out with. The bottom line is that you should make good on the loan ASAP.

The other thing I would add is to limit credit card debt right from the start of your career.

[Tuan]

I graduated in 08' so it was refreshing to see something for my age group.

1. Save at least 10% of your income.
Done. I have a good paying job and I am going to fully fund both my 401k and Roth IRA this year.

2. Student debt? Try to pay it off as soon as possible, and pay more than minimum.
Did the 'have college funded by scholarships and work-study jobs' route so I have none here.

3. Consider moving back in with your parents temporarily.
I am actually doing this now but it isn't what you think. My parents are overseas so the house was going to be unoccupied or rented out. Now, not only I don't have to pay rent but work is only 15 mins away and I don't go insane with road rage.

4. Look at novice investment options.
I'm grateful that I found FMF and Money Tips Network or else I would be clueless on what to do.

[Mary]

I need a good paying job first. I graduated in 08 and still haven't found one.

[Steve]

This is a good list - all the options are fairly easy to do. The hardest part is doing a little bit more than the bare minimum. Instead of saving 10%, try 20%. I also recommend if you don't find a job right away, to explore options like continuing education, especially one that is online like ICDC College so you have the freedom to work part time or look for a full time position. Mary - you're not the only one out there. Keep your head up.

[William]

I temporarily moved back in with my parents. That was one of the best decisions. It helped me land a decent job which propelled me into a career.

Graduated '07.
Career started 2011.
4 years in the making.

Hard work. Well worth it