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New Grads: The Most Critical Piece of Advice

April 08, 2019
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It’s that time of year.  Students in their last semester of college will soon finish up finals exams and begin their journey into the real world.   This is an exciting time.  It is also a pivotal time as the decisions new graduates make right now can have consequences that may span for years to come.   

New graduates are usually inundated with advice and tips, especially those pertaining to job searching or resume writing.  However there is one critical piece of advice  that is often overlooked during this transitional phase- How to establish and follow a budget.

The need for budgeting skills is crucial for financial stability.   Yet very few graduates take the time to realistically consider expenses and income before they lock themselves into an apartment lease, a car loan or other costly commitments.   Couple that with the fact that 1 in 4 college students will graduate with over $5,000 in credit card debt¹, and the average amount of student debt upon graduation is approximately $35,000² .   All together, this is dangerous setup.  

Stretched too thin, new grads are less likely to put money into savings accounts or into retirement accounts. This becomes a double whammy if it means forgoing a company match on the 401k.  Additionally living with the absence of savings can cause undue stress when unexpected expenses arise.  It also becomes very easy to rack up thousands of dollars in credit card debt in very little time.   

Thankfully, there are easy ways that new grads can stay on top of their finances and avoid costly mistakes.  Consider the following:

  • Download a budgeting app. Mint and YNAB are some common apps that may be helpful tracking cashflow and keeping you on top of your income and expenses.
  • Use a paycheck calculator. Plan ahead long before that first paycheck arrives. There are several free calculators online that help you estimate exactly what your take-home pay will be. 
  • Consider refinancing student loans over a longer term. The ability to make minimum monthly student loan payments may be difficult. Extending the loans over 20 years instead of 10 years can reduce monthly payments if needed.
  • Create realistic goals. Figure out what is important to you (savings, debt repayments, vacation funds, etc.)  and come up with a realistic plan to get there.   
  • Live with roommates. It can be considerably less expensive than living solo.
  • Talk to an advisor. A professional may able to help set you up for success.

¹https://www.thebalance.com/credit-card-companies-love-college-students-960090

² https://www.incharge.org/financial-literacy/data/student-loan-credit-card-debt-statistics-nfcs/