Financial Tips for Recent Graduates: Managing Money After School Ends

As a graduate, you’ve endured years of hard work, late-night study sessions, and perhaps a few too many instant noodles. 

As you step into the “real world,” one of the most crucial skills you can develop is financial literacy. Here are some tips to help you navigate the exciting yet challenging journey toward financial independence.

1. Create a Spending Plan and Stick to It

The cornerstone of financial stability is creating a spending plan. Start by listing all your income sources, whether from your job, side hustles, or any other avenues. Next, list all your expenses, including rent, utilities, groceries, transportation, student loans, and entertainment.

Once you have a clear picture of your income and expenses, allocate your money accordingly. Aim to save at least 20% of your income and allocate the rest to your costs. Apps like Monarch or You Need a Budget (YNAB) can help you track your spending and stay within your means for each category. By creating a spending plan customized to your own priorities and desires, you are more likely to successfully stick to it.

2. Build an Emergency Fund

Life is unpredictable, and unexpected expenses can arise when you are least ready for them. Building an emergency fund to cover these unforeseen costs is crucial without dipping into your savings or turning to credit cards.

As a rule of thumb, aim to save three to six months’ worth of living expenses in your emergency fund.¹ Start small if you need to, but make consistent contributions until you reach this goal. Consider opening a high-yield savings account separate from your checking account to reduce the temptation to spend this money. Websites like depositaccounts.com can help you compare savings account interest rates from many credit unions and banks, but be sure to read the fine print regarding minimum or maximum balances or direct deposit requirements to earn the advertised rate.

3. Tackle Student Loans Strategically

If you have student loans, you’re not alone; according to NerdWallet, 43 million Americans face this challenge.² Taking these student loans into account as you plan your financial future will help set you up for success.

Start by understanding the details of your loans, including interest rates, repayment plans, grace periods, and possible loan relief programs such as PSLF. Then, create a plan to pay them off efficiently without sacrificing your financial well-being. Every graduate’s repayment plan may look different depending on their financial situation, but staying on top of this debt is important.

4. Start Saving for Retirement

Retirement might seem like a lifetime away, but the earlier you start saving, the more time your money has to grow. If your employer offers a 401(k) or similar retirement plan, take advantage, especially if they match contributions.

Consider opening an Individual Retirement Account (IRA) in addition to your workplace retirement plan. Traditional IRAs offer tax-deferred growth, while Roth IRAs allow tax-free withdrawals in retirement.³ Aim to contribute a percentage of your monthly income, increasing it as your salary grows.

5. Don't Neglect Insurance

Insurance might not be the most exciting topic, but it’s crucial for protecting your finances in emergencies (particularly earlier in life when you don’t have as much saved to cover these situations when they come up). Health insurance is a must-have, whether through your employer, a marketplace plan, or a parent’s policy until age 26.

Renter’s insurance is often relatively inexpensive and covers your belongings in case of theft or damage. If you own a car, auto liability insurance is mandatory and can save you from massive expenses in the case of an accident. Insurance premiums can vary widely from company to company, so be sure to compare multiple insurance carriers by using an independent agent or a service like The Zebra (or request quotes from companies directly). 

As you progress in your career and begin to have others counting on your income, consider disability and life insurance for added protection

6. Set Financial Goals

Having clear financial goals gives you direction and motivation. Whether it’s saving for a down payment on a house, traveling the world, starting a business, or retiring early, define your goals and create a plan to achieve them.

Break down your goals into small, manageable steps. Celebrate milestones along the way, and don’t be afraid to adjust your plan as life circumstances change. Regularly reviewing your goals keeps you accountable and focused on your financial journey.

7. Educate Yourself

Knowledge is power, but you don’t have to become a financial prodigy to set yourself up for long-term success. The suggestions above are a good starting point, and the resources below can help you get to the next level:

Blogs & Forums:

• Personal finance subreddit
• Bogleheads Wiki and forum

Podcasts:

• Weird Finance
• AffordAnything

Books:

• The Millionaire Next Door by Thomas Stanley
• Your Money or Your Life by Vicki Robin
• Finance for the People by Paco de Leon

8. Seek Professional Financial Advice When Needed

While educating yourself is crucial, don’t hesitate to seek professional financial advice when needed. A financial advisor can provide personalized guidance based on your unique situation and help you pursue your financial goals. Look for an independent, fee-only CERTIFIED FINANCIAL PLANNERTM (CFP®) professional to ensure they are a fiduciary working in your best interests. Organizations like XYPN, NAPFA, and Garrett Planning Network provide search tools to locate fiduciary advisors.

Many financial planners offer free consultations, so take advantage of these opportunities to ask questions and gain insights. They can assist with retirement planning, investment strategies, tax optimization, insurance questions, and many more areas of personal finance.

Embarking on your post-graduation financial journey can feel daunting, but with the proper knowledge and habits, you can set yourself up for long-term success. Start small, stay consistent, and don’t be afraid to learn from your mistakes. The choices you make today will shape your financial landscape tomorrow.