Graduating college, remember when you were a kid and you were like, “Wow, adults are really boring. All they do is pay bills!” Yeah well now that’s you.
These are a few things related to personal finance and money that would be helpful to know in college, if you’re just out of college, or even if you’re midway into your adult life and you just need a better way to get started with managing your money and getting a handle on your finances.
1. Living with parents is okay
And in fact, it’s a privilege. If you have a supportive home that you’re able to go back to and your parents are letting you live rent free or for a reduced rent amount, that may be an offer that you want to take them up on.
Living alone is so expensive. And let’s say that you’re planning on spending anywhere from $1,000-$1,500 on rent per month – that is $12,000-$18,000 a year that you could be saving.
And not that you have to stay there for a long amount of time, but you do want to consider your different options.
For example, if you have $18,000 in student loan debt, maybe living at your parents house for a year for be a good idea so that you can put that extra money toward paying off that student debt, and then you won’t have that debt carried around with you for the next 30 years.
Living at home can also open up other opportunities for you that you may not have if you move out on your own. It frees up both your time and your money.
So instead of rushing into the first job you find after college, maybe living at home for a little while will let you build up some extra skills, or just spend more time on your job applications so that you’re able to get a higher paying job.
2. Salaries are always negotiable
If you are graduating from college, this is probably the first time you are applying for a “real-world” job, and it’s important to know that salaries are always negotiable.
You do not have to take the first job offer that you get. And you do not have to settle for a salary amount that you are not happy with. Don’t be afraid to ask for what you think you deserve – but at the same time there can be a benefit to doing work for free or for cheaper. Just make sure that the experience you’re gaining from that lower paying job is actually going to offset that lower pay later down the road.
So if you’re offered a job that is paying you less that what you’d ideally like to make after college, you really have to consider whether or not it’s worth it.
If it’s for a reputable company in the industry that you want to be in, in the city that you want to be in, yeah that might be a good opportunity to take.
If it is for some company where you’re kind of doing the grunt-work and you don’t really see it leading you anywhere, it may be worth it to hold out for a little while and to wait for a better offer.
3. Student debt is not something to ignore
Student debt is not something to ignore, and it is important to figure out what your plan is for repaying it. If you do have student loans, you need to sit down and actually figure it out.
If you have loans from different places, add up all of those loan amounts, add up how much you owe, know what that total number is. Then sit down and figure out what the minimum payments that you have to make are, and figure out how long it would take you to completely pay off that debt if you made that minimum payment every month.
That I know is probably not fun to look at, but it’s good to have an idea of when you would actually be able to pay off that debt, because a lot of times, people find that date that they would be debt free is actually a lot further out than they originally thought.
So if you’re not happy with how far out that date is, then what you can do is figure out how much sooner you’d be able to pay it off you contributed an extra $100 or $200 a month towards that debt.
Looking at how much money you owe someone else is not going to be a fun activity. But it is really important to get an idea of where you stand financially and what your goals need to be for the job you’re going to be taking, like what salary are they going to be paying you?
Are you going to be able to comfortably make those minimum payments? And it can also give you a better idea of what your living situation needs to look like after college, maybe if you do need to live at home with your parents or find more roommates to reduce your cost of living so that you can put that money towards that debt, or whatever else your financial goals are.
4. If you are saving money, it should be in a high yield savings account
If you are saving money, it should be in a high yield savings account or a high-interest savings account. So hopefully we all know what interest is, or at least have an idea of it. It’s pretty much a bank is paying you a tiny amount of money to incentivize you to keep your money with them.
Now a large bank is probably only going to offer you an interest rate of 0.01%, which is not ideal.
That’s not going to make you any extra money, that’s not going to keep up with inflation, it’s just really not doing anything for you.
A lot of online banks like Capital One 360, Discover, CIT Bank – those all competitively have high yield savings accounts.
So if your savings are not already in a high interest savings account, you may want to consider moving that money and opening up a new bank account with one of those high interest banks.
Also under this category of savings accounts, it’s a good idea to go ahead and set up an emergency savings account that you do not touch unless there is actually an emergency. (Like your car tire pops, or you break an ankle, or something like that).
Even if you’re not setting aside a ton of money at first, set aside something. Like set aside $10 or $20, just so that you can get yourself into the habit of taking money out that is not for discretionary spending, that you are putting towards saving for the future.
5. Credit cards are not evil, and in most cases you’ll actually need one.
Credit cards are not evil, and in most cases you’ll actually need one. Now I do understand if you are someone who knows that they have a spending problem, I understand the reasoning behind not wanting a credit card.
But in most cases, you are going to need a credit card in order to start building a credit score. (Loans also affect credit score).
If you ever get an apartment by yourself, they’re going to look at your credit score. If you are trying to buy a car, they’re going to look at your credit score. If you ever want to buy a house in the future, guess what? They’re going to look at your credit score.
So it’s good to learn early on about how credit cards are actually supposed to be used, and how they can benefit you. And it’s good to teach yourself how to use them responsibly.
So we’ll briefly dive into what you have to do to actually get a credit card set up.
If you’ve never had any access to any credit before, you’ll probably need to start with a secured credit card.
You can usually ask whatever bank you’re currently using if they offer secured credit cards, and if you can get it through them.
What you’ll do is you’ll give them $100 or $500 for example (or whatever their pre-determined amount is). That’s how much “credit” you’ll have on card.
You’ll give them that deposit so that they know that if you are not able to pay that back, they’re not taking on that risk because they have that money sitting there.
What you would then do is make a small purchase on the card every month and pay it off in full, on time, every month.
If you absolutely don’t trust yourself with a credit card, it doesn’t actually have to be in your possession. What do I mean?
Well let’s say that you have a recurring subscription to something, or a recurring expense every month, like a $10 parking garage fee. Let’s say that every month you have to pay $10 every month to park in that parking garage. So what you can do is put that charge on your credit card, so that every month your credit card is automatically charged $10.
You can also automatically connect your bank account to automatically pay your credit card bill for you every month, so that it is always on time and it is always paid in full.
Assuming that that’s all set up automatically, you can then give your card to your parents, your grandma, or someone you trust so that you aren’t able to use it on discretionary spending.
But the bottom line is that credit is extremely important. Don’t overspend. Don’t miss a payment. And don’t get into credit card debt if you can avoid it.
6. Learn how to budget
When people think of budgeting, what often comes to mind is people obsessively tracking every single penny that goes in and out. That doesn’t necessarily have to be how you budget.
An easy way to start is to use an app like Mint that will automatically track everything for you. So what you do is you connect your bank accounts, you connect your credit cards, and the app will show you where you are spending.
It will also show you which accounts you’re spending in, and which categories you’re spending the most in.
What’s important is that you have a record of your spending somewhere. It doesn’t necessarily need to be obsessing over every single penny. But you need to have some record of where you are spending your money so that if you have a month where you’re like, “Man I don’t know how I spent an extra $500” – now you can actually go back and see where you spent that so that you can avoid doing it again.
As far as budgeting, you really just have to find something that works for you that you’re actually going to stick with. So that app Mint is free, there’s also a paid app called You Need a Budget (YNAB) that’s pretty popular, and you could always just make your own spreadsheet, or you can write it down on paper. You could also use something like cash envelopes where you’re actually taking out the cash, sorting it into categories, and limiting your spending in each category to the amount of cash that you have in the envelope.
So several different options there – do what works for you. But it’s important to track your spending.
7. Start investing
Start investing and learning about investing as soon as you can. A lot of people are going to be prioritizing paying off student debt, and that’s totally fine. But do start at least learning about investing and how that can benefit you in the future.
You can start with tiny amounts. There are so many investing apps where you can start with $0, $10, or $100, that it makes it super easy to just experiment and learn what investing is going to be like and why you should be doing it.
8. Sign up for your company’s 401k
If your employer offers a 401k once you find a job after college, it’s a good idea to go ahead and sign up for that.
Signing up for your employer’s 401k is probably going to be the easiest option for you to start investing if you have zero experience.
Usually whoever is working in your company’s HR department, or in accounting, is going to be able to guide all of the employees through the 401k sign up process. They should be able to explain to you what your different options are, and why you may want to go with those options.
Even though retirement seems like it’s super far away when you’re first graduating college, it’s really important to start as soon as you can, so that you can really maximize the benefit of compounding interest over time.
9. Being self employed is a realistic option
Being self employed or having your own business after college is actually extremely realistic, it’s just not encouraged in the college system.
So especially for things that are coding or design related, you can make as much money, or more money by being self employed or having your own business.
Just know that if you do go this route, it is probably going to be financially difficult and a little bit discouraging the first few months or even the first couple of years. But you can do it, and long term that is going to be an extremely valuable skill that you’ve built to be able to work for yourself, and to be able to run your own business.
10. Your time is valuable
Whether this means that you’re not able to find a job after college, or that you’re being under compensated, just know that there is someone out there who will value your skills and who will pay you what you think you are worth.
But in addition to that your time to yourself is worth something as well. Sometimes after college people will go through an intense coding bootcamp, or they take a photography class, or they just develop some skill on their own that they wanted to do anyways but didn’t have a chance to.
Spending that extra time after college on learning those extra skills may give you the ability to negotiate for more money in your first job, or give you the ability to start your own business.
You can use that valuable time to develop a skill that will help them throughout their careers.
So really if you find yourself with a period of free time after you graduate, really maximize that time that you do have to build relationships with people, to develop new skills, and to learn more about your finances.