Financial Advice For New College Graduates: 3 Focus Areas (Money, Lifestyle & Career)
As a new graduate from university or college, you’ve got the world ahead of you. Those long hours of churning through books, taking exams and wanting to break out of the education system are behind you.
You’ve unlocked freedom and a bigger opportunity to control the life you want to live. You’re ready to enter “the real world” and start the next chapter of your life.
It can be an overwhelming time as you try to balance so many new experiences and priorities. If I could go back in my own life, there is one major area I wish I would’ve better prepared myself for from the moment I graduated.
From general day-to-day money management to investing for retirement and everything in between. It’s such an important focus point that every person needs to grasp and unfortunately I made some money mistakes once I stepped out from university.
However, as a new grad you have the opportunity to set yourself up for financial success. Through some core habits and a committed mindset, the rollercoaster ride that is money and life can be steadied.
This could probably be a list post with 155 money tips for grads. However, when I look back at when I graduated I think the strategies I needed could ladder into 3 financial focuses for new graduates.
Those financial focus areas to take control of are:
- Build Your Knowledge About Personal Finances & Money Management
- Avoid Lifestyle Inflation
- Invest In Your Career & Personal Development
1.) Build Your Knowledge About Personal Finances & Money Management
Financial literacy is a pitfall of the current education system and society in general. One of the biggest wins you can have is to counteract those potential shortcomings immediately.
Build a foundation of knowledge about the basic principles of personal finance and money management. Starting with some easy to understand lessons and insights on the role money will play in your life. You’ll quickly learn that you’re in control and your eyes will be opened to the simple steps you can put into action to totally set yourself up for success.
These offer wide-ranging, all-encompassing financial management teachings and strategies for someone to grasp at an early age.
The natural side effect from diving head first into personal finance books like the 5 above will be a desire for continued learning. They will put you down the path of setting up your financial framework. Looking for other great reads as a young adult? Check out 10 of the best books for twenty somethings to help master your money and career.
The Introductory Financial Focuses For College Graduates
The advice shared by the authors will shine light on all of the essentials of personal finance. Their decades of expertise teaching and communicating these facets of money management have helped thousands, if not millions.
The 5 books mentioned above will introduce you to the concepts to help master your money.
- Budget: Start a budget with a free service like Mint or Personal Capital.
- Big 3: Limit your big 3 expenses as best possible: housing, transportation and food. I dive deeper into these in the following Avoid Lifestyle Inflation section.
- Housing: Extend living at home with your family or get roommates to control housing costs.
- Vehicle: Buy a dependable used car with cash (or live close enough to work to walk).
- Food: Mitigate expensive restaurant and bar tabs and cook at home as often as possible.
- Credit Cards: Avoid credit card debt like the plague and use them as a rewards tool if you’re responsible.
- Student Loans: Develop a plan of attack to pay off your student loans (here is my student loan repayment plan). An amazing resource for everything student loans is Student Loan Hero.
- Emergency Fund: Build an emergency fund of liquid cash in a high interest savings account. Here is an overview to give you everything you need on emergency funds.
- Company Match: Get the 100% match from your employer into your 401k (or RRSP/RPP).
- Investing: Invest in low-cost index funds for the long-term. See JL Collins Stock Series.
- Automation: Automate your money system.
- Diversify: Diversify your income streams with side hustles and entrepreneurial efforts.
If you can get a grasp on these concepts you will be ahead of 99% of the world. You will be well on your way to building wealth and after your system gets rolling, that momentum will just compound.
I touched on elements of building good money habits to highlight how compounding these fundamental pillars can generate that momentum. As well as the personal finance resources and content that saved my financial life.
After mastering the basics you can start to expand your knowledge base. Your curiosity and personal preferences might lead you to real estate investing, dividend investing, passive income streams and so on.
The ideal scenario is eventually you can scale your wealth by no longer just trading time for money. Starting a business or developing a broad portfolio of income generating investments will unlock that freedom lifestyle.
The first step is just fostering that understanding through the experience and wisdom of others.
Personal Finance Resource Starter Kit
I packaged up a collection of personal finance resources and content into a starter kit. The kit includes 15 books, 35 podcasts, 15 blogs, 15 pieces of cornerstone content and 29 money apps or services.
The free Personal Finance Resource Kit will shed light on all the pillars of personal finance knowledge any new grad could need to educate themselves on the foundations of money management and wealth building.
2.) Avoid Lifestyle Inflation (The Piece Of Financial Advice For New College Graduates)
Chances are you lived a pretty moderate life during college or university.
Maybe you bought a few new pieces of clothing each summer but ideally most of the money you earned at your summer jobs went to support your tuition. And hopefully you had some fun with that money too. You’re only young once.
Now you’re starting your career and earning a comfortable salary. This new bi-weekly payment will likely be the most money you’ve ever received in your life. And it will keep coming every 2 weeks. Maybe you will get a bonus after your first year and progress your salary with deserved raises each year.
Well there’s no reason to not start to showcase this new level of financial resources? 60” TV, iPad, Jordans, designer bags, a round of top-shelf tequila shots at the bar, financing a new Lexus, the full 658 channel TV package, all-inclusive vacations.
WAIT! Hold on. Remember what the books said and all the content from the Personal Finance Resource Starter Kit?
Live like a college student for as long as you can. Don’t let lifestyle creep set in as your income grows.
It will be so tempting to splurge. We’ve been hardwired this way from decades of TV commercials, Instagram celebrities and psychological warfare from marketers. Fear of missing out, or FOMO as you kids call it, will tug at your wallet or purse.
Don’t try to keep up with the Joneses. Let the Joneses overspend or get into debt as your wealth momentum builds and builds.
The big 3 expenses noted above (housing, transportation and food) will be the most likely culprits of lifestyle inflation.
Saving Money On Housing (Avoiding Lifestyle Inflation As A New Grad)
The rent vs. buy debate is so personal and deeply rooted in your location, financial situation and overall lifestyle goals. So I won’t touch on that.
However, there are some effective ways to manage this expense. Avoiding lifestyle inflation on your housing is a major opportunity to expedite your financial success at an early age.
Stay At Home
Yeah, I know. Lame, right? Building wealth and mastering your money isn’t about being cool. And if living at home with your parents saves you tens of thousands of dollars in the first two years after university…I’d argue “wow that’s actually really cool”.
Based on data from the U.S Department of Agriculture and Labour Statistics and recent cost of living estimates from Numbeo, MONEY calculated the following savings assumption for living at home with your parents.
- San Francisco: $30,000+ saved annually
- New York: $28,725 saved annually
- Chicago: $17,329 saved annually
- Dallas: $13,611 saved annually
Sure, it might not be the freedom you desired and your Mom asking you to make your bed might be a nuisance. But your future bank accounts and financial standing will thank you.
Staying at home for an extra year or two after graduation could change your entire financial journey.
If moving out or living under your own roof is the strategy best suited for you, there are some surefire tactics to manage that expense inflation as well.
If you lived on campus during university or lived with friends offsite, why not continue the trend of having roommates?
This article from Insider highlighted the potential savings that having a roommate can generate based on research by the real estate company Trulia.
As the chart from Trulia highlights, we’re looking at 30% to 40% savings by sharing a 2-bedroom as opposed to your own 1-bedroom. Similar to living at home, this will expedite your wealth building.
Another option if you’re in the situation of being able to purchase a home is the opportunity to househack. What’s househacking? This article and podcast from Millennial Money will outline everything you need to know about househacking.
In essence, you can live for free (or much less than normal) by having roommates pay you rent (that covers some or most of the mortgage). Or purchase a duplex, you live in one unit and rent out the other.
It allows the you to use money from other people to pay down the mortgage and eventually reap the appreciation value.
Controlling Transportation Costs (Avoiding Lifestyle Inflation As A New Grad)
The next area of the big 3 that can often come victim to lifestyle inflation is transportation.
You’re a working professional now earning some good money. You deserve a nice ride, right? You might want to finance a brand new car. However, as soon as those wheels pull of the lot that asset is depreciating at a rapid pace. New cars generally lose 20 to 30% of their value in the first year.
The interest rate on your car note also means your paying a vig to someone else. Remember what the books and all the resource kit content said about debt? This article from Money Crashers shares those same sentiments on loans or financing with 6 reasons to buy a car with cash and avoid car loans.
Pretty shocking numbers, right?
You’re looking to build wealth and financial freedom. You can take a different path here with your transportation should you choose.
Buying Used Cars With Cash
If you needed more convincing here is an article from Money Help Center outlining the benefits of buying a used car.
Dependable, well maintained and cost-effective.
If you use those 3 criteria on your search for the perfect vehicle, you’re setting yourself up for success. The money momentum on your financial journey continues to roll.
Another option that would ladder into our housing section above would be selectively living close enough to your place of work so that you can walk or bike.
I wrote a post on the benefits of walking to work for 4 straight years. I purposely chose my current place because of the ability to walk to my office each day. It’s saved me tens of thousands of dollars and had other benefits on my health and general wellbeing too.
It might not be an option for you based on your living situation and career but it’s something to consider.
Saving Money On Food (Avoiding Lifestyle Inflation As A Young Professional)
The final piece of the big 3 expenses is of course food. Sustenance. Tasty, delicious sustenance. Unfortunately, with our increased income can also come an increase in the dollars being spent on food.
You don’t need to live a life of squalor on ramen noodles and saltines. You’re an adult and adults like to eat out, have a drink or two and enjoy the company of loved ones, friends and coworkers.
Focus on sticking within your budget and be mindful of your spending habits in a few key categories.
My old grocery shopping strategy would be strolling into the store with no list, plan or idea on what I needed. I would let whatever catches my eye dictate what went in my cart.
That was a costly mistake I made for the first few years after university. Luckily, through the resources and content on personal finance we mentioned above, I was quickly alerted to my flaws.
Since then, I’ve implemented the strategies to master 13 easy ways to save money on groceries.
Simple, easy to implement tactics to save over a thousand dollars each year.
The art of saving money on groceries essentially boils down to a few key points.
- Find the cost-effective store options near you
- Meal plan
- Make a list
- Stick to that list
- Leverage coupons or specialty offers when they make sense
- Bulk cook
- Rinse and repeat
It can be pretty simple once you build a grocery shopping and cooking system that fits your lifestyle. With effective spending and planning, you’ll avoid that lifestyle inflation and live within your means.
I use a 19/20 ratio. I bring my lunch 19 days and buy lunch out with my coworkers once for every 20 days I’m at the office.
Just pack your damn lunch. That’s all this section needs to say.
Drastic? Yes. Saving me thousands annually? Yes.
3.) Invest In Your Career & Continued Development As New College Graduate
As you start your professional career, the opportunity to break away from the pack and set yourself up for success is available from day one. The basic principles you’ve heard your entire life ring true in almost any workplace.
Show up on time, work hard, maintain a positive attitude and look for growth opportunities.
It sounds simple but take it from someone with experience in a billion dollar organization. So many people show up and do the bare minimum. And guess what they get back? The bare minimum in terms of bonuses, raises, promotions and networking opportunities.
If you do even 10% more than the standard new grad employee, you’re going to see results and move forward. But you aren’t a 10% better kind of person. You want more.
The best I’ve seen this summed up is by ESI Money. The article he wrote How To Manage Your Career To Make Millions More is an amazing read for you as a young professional.
The condensed headlines of ESI Money’s 7 Steps To Maximize Your Career are:
- Perform as well as possible at your job
- Be likeable or ‘more likeable’
- Network within and outside your organization and industry
- Be more ‘attractive’ (in the vein of dressing well and taking care of yourself)
- Continue learning and developing skills
- Manage yourself with systems for goals, company dynamics and find a mentor
- Market yourself
If you actively pursue maximizing these 7 steps, the success will follow. The exact tactics might differ based on the industry your career is in. But the fundamental principles remain the same.
Here are 3 books on productivity and successful habits that might help you develop that forward-thinking mindset:
- Principles: Life and Work by Ray Dalio
- Smarter Faster Better: The Transformative Power of Real Productivity by Charles Duhigg
- Mindset: The New Psychology of Success from Carol S. Dweck
You’re out of school now but your learning days aren’t over. You need to keep investing in your personal growth both professionally and personally.
From courses, books, mentors, new hobbies and any other opportunities to learn or grow, your financial success can shoot forward with a commitment to development.
Take an active role in looking to develop your professional skill set and knowledge from the start. Similar to the concepts we mention above, this can put you ahead of 95% of other employees in your age range.
Here are a few general tactics to help do that.
- Mentor: find a senior leader in your organization or industry to gain knowledge and insight from. This article from Forbes gives insights on how to find a mentor.
- Conferences: be a willing participant to attend conferences in your industry to grow your network and stay connected to emerging trends.
- Courses: ask your HR department if the organization has education grants to take additional courses to further your skills.
- Network: As ESI noted above, you want to be building connections and making positive impressions with all stakeholders in your career.
As the great Warren Buffett said:
“Ultimately, there’s one investment that supersedes all others: Invest in yourself. Nobody can take away what you’ve got in yourself, and everybody has potential they haven’t used yet.”
Keep investing in yourself inside your career.
Outside of work, you can look for opportunities to keep learning and developing skills or knowledge. The topics can stretch outside your career field, the importance is to just keep developing.
- Online Courses: Check my post 55 great online courses for millennials, entrepreneurs and side hustlers for some cost effective learning opportunities.
- Books: See my recommendations page for my all-time favourite reads.
- Podcasts: I pulled together a list of 80+ podcasts to help improve your life, finances, business, health and more.
Conclusion: Financial Advice For New College Graduates – 3 Focus Areas To Master (Money, Lifestyle & Career)
It can be an overwhelming and daunting time as a new graduate. The increased level of responsibility, stresses of freedom and uneasiness in this new lifestyle can be tough to master.
However, if you’re actively looking to master your finances and grow your career, you’re undoubtedly setting yourself up to take advantage of all that comes your way.
New and exciting opportunities will present themself to you as you navigate the next 5-10 years of your life. Be flexible and adaptable. You’re young and have the world ahead of you.
And hey don’t forget to have some fun too. You’re only young once.
Here are some other posts you might want to checkout.
- 35+ Rewarding Side Hustles Anyone Can Do To Earn More Money
- Online Jobs For College Students: 11+ Easy, Legit Ways To Make Money In School
- Stop Wasting Money – 11 Bad Financial Habits To Stop To Help You Save More Money
- 15 Smart Money Moves To Improve Your Finances In 2019 (Small, Easy Wins)
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