Money Tips for College Grads

Real World Money Tips for New College Grads

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School's out for the summer! Instagram is overflowing with caps, gowns, diplomas, and celebrations as adrenaline flows through this year's college grads. It's an exciting time for rising young professionals, but many will face a reality check. Sure, graduating comes with a level of freedom and opportunity. But it also introduces the responsibility of navigating an adult world that looks a whole lot different. As you manage your money independently (perhaps for the first time), it's important to have a guide that will keep you grounded. These real world money tips will set you up to reach those long-term lifestyle goals.

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1. Start tackling your student loans.

Perhaps the biggest reality check for new graduates is managing student loans. If you fall in that camp, you are not alone. In fact, the average graduate in 2016 carried over $37,000 in student loans! Determining a plan to tackle this debt is vital to your financial wellness. Otherwise, interest expense will start to snowball before you know it. There are a few tips and tricks to ease the process, which I cover in my guide to paying down debt. I'm also a fan of Student Loan Hero, a platform that tracks your loan information on one dashboard. The site delivers advice on refinancing and consolidating your loans and offers helpful resources as you navigate this new territory.

Best Student Loan App: Student Loan Hero
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2. Build an emergency fund.

Building an emergency fund is just as important as paying down high interest student loans. That means setting aside some savings every month that you can access in case of emergency. Let's say your car needs a new battery. Or your home air conditioner breaks in the middle of summer. Maybe you find yourself in between jobs or managing a pay cut. These unexpected events can break your financial progress if you're not prepared. I recommend saving three to six months of living expenses in a safe, easily accessible account to protect yourself. For everything you need to know, head over to my complete guide to building an emergency fund.

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3. Contribute to your employer's retirement plan.

If you're in your twenties, retirement planning may not be top of mind. However, you're doing yourself a disservice if you don't start saving today. That's because compound interest literally turns time into money. Let’s say you start saving $500 per month into an account earning 5% interest. In 20 years, your balance will be over $200,000. In 30 years, it’s over $400,000. Fast forward 50 years, and it’s $1.3 million! Over time, you earn interest not just on your savings, but on interest you have accumulated. This allows your nest egg to grow exponentially.

There are a few tax-advantaged retirement plans your employer may offer, such as a 401(k) or Roth IRA. Your company may also match your contributions up to 3-5% of your salary. This is free money, so don't leave it on the table! If you can afford it, contribute at least what your employer will match to collect that extra dough.

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4. Create a budget.

Budgets get a bad rap for restricting the life you should be enjoying. But the right kind of budget should empower you rather than confine you. It should allow you to savor the things that make you happy and still protect your future. The 50/20/30 budget is a helpful starting point. Here's how it works:

  • 50% of your after-tax income is spent on essential living expenses (housing, transportation, groceries, utilities, insurance)
  • 20% goes toward financial and savings goals (debt paydown, general savings, 401(k) contributions)
  • 30% is reserved for personal, discretionary purchases (travel, hobbies, fitness, date nights)

Don't panic if your budget doesn't match this template exactly. Yours may look different depending on factors such as your city's cost of living. The 50/20/30 budget is not a strict rule, but rather a directional, proportional guide. To simplify things, I crafted an easy-to-use budget template you can download at the bottom of my budget guide.

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5. Boost your credit score.

There's nothing that embodies "adulting" quite like applying for a mortgage, renting an apartment, or buying a car. And there's one key element that all of these tasks depend on: your credit score. Your score determines your loan approvals, interest rates, insurance premiums, security deposits, and even job applications. If you've never had a loan, lease, or credit card in your name, you may need to start building a positive credit history from scratch. My ultimate guide to understanding your credit score will teach you all the best practices you need for monitoring and improving your credit.

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6. Don't stop learning.

You're finally done with final exams, but that doesn't mean your studies stop there! Our digital society is changing rapidly, and to stay relevant, continuous learning is more important than ever. Keep your skills fresh and bolster your resume through reading self-help books (my favorites are here) and taking online classes. I have mentioned Coursera and Udemy in other posts, but I have a new favorite to throw in the mix. Last month, I discovered Skillshare, an online learning site offering over 16,000 classes ranging from a few minutes to a few hours. From enhancing public speaking skills to learning social media branding, you are sure to find a topic that matches your interests and empowers you to further your career or launch a side hustle. Skillshare has become a valued step in my nighttime ritual, where I spend 20 minutes capping off the day with a dose of productivity.

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The Bottom Line

This year, millions of grads will blindly manage student loans, apply for mortgages and credit cards, and spend money without direction from a budget. It's no secret that schools aren't teaching the personal finance skills we need to thrive in the real world. When I graduated from college, I couldn't find a resource that made personal finance approachable. There was no "Adulting 101" guide to ease my anxiety as I navigated a new world. This is why I created ModMoney, a resource I wish I could access years ago. I have found such passion in creating this content and hope to empower young grads to make informed, proactive, and savvy money decisions.

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