Financial Suggestions For an Upcoming Graduate
This week we finally experienced some nice weather so I met up with a friend for tennis. She’s finishing her last year of dental school and had some free time. After the match she asked if I wanted to grab a beer and, like a weirdo who just updated her budget that morning, I replied, “Sure! I have $14 left to spend this month.”
My friend laughed at the precise total I could spend on after-tennis beers, but that comment opened the door to a money conversation. And money conversations are among my favorite kinds of conversations 😈.
She asked for some money suggestions, and here’s a quick lowdown of what I said. I kept it light, considering it was a casual afternoon discussion and we had plenty of other things to talk about.
Suggestion #1: Take advantage of financial counselors at your university
Most universities (and even individual college programs) employ some sort of advisory staff to help students with transitioning to the “real world.” This usually includes someone to help on the financial side of things.
It’s always productive to talk openly and ask questions when it comes to finance, and since friends tend to avoid money matters, these advisors can help. I would also encourage those nearing graduation to take detailed notes and do their own research, but these meetings can be a great first step.
Suggestion #2: Be honest with your debt
Get it all out there on the table (or digital spreadsheet). Write out every single debt you’ve accumulated during undergrad and grad school. Federal student loans. Private student loans. Credit Card balances. Car loans. Everything. (And if you’ve managed to graduate with zero debt, I commend you! Your hardwork and discipline puts you in a group of people I didn’t know existed after my 5 years of school. Keep on keepin on!)
Make sure you clearly write or type the total amount owed, when the payments begin (if there’s a grace period), and the interest rates. Call the companies if you’re not sure about any information. From there you can paying at least the minimum on all and focus what you want to prioritize — Will you concentrate on knocking out the loan with the highest rate first and work your way down? Or will you concentrate on paying off the smallest loan first to gain momentum in paying off the others (aka the “debt snowball” method)?
Both techniques have merit, so choose the one that best aligns with your motivations and goals. You can also discuss these loans with the advisors I suggested seeing at your university. Develop your own amortization (pay off) schedule and get rid of these suckers as soon as you can.
Suggestion #3: Start a habit of saving (especially for retirement)
Contributing to a savings account isn’t always the most fun use of your money (Unless you’re a
nerd normal person like me who loves to see that balance rise like it’s a game or something), but starting consistent saving patterns and habits is so important. A savings account can serve as a buffer against any unforeseeable situations and help you plan for the bigger purchases.
One of the other main vehicles for your savings should be a retirement account. If you have not already discussed retirement options with your new employer, do so immediately. Some employers offer a 401(k) or 403(b) and may even match your contributions for free money! You can also take it upon yourself to open an IRA (Individual Retirement Account) or Roth IRA and use those tax advantages — and you can also have more than one retirement account.
These types of accounts all allow your money to grow without you paying taxes from year to year. IRA and 401(k)s/403(b)s can automatically take your pretax income directly from your paycheck. You don’t need to remember to transfer money and you don’t pay taxes on that money (up to certain limits). Roth accounts use money after taxes, but you do not pay taxes when you withdraw after age 59 ½ (again, there are some limits).
Reducing your tax burden can make a huge difference — paying yourself first instead of the government obviously makes sense to help build wealth. And that tax-free compounding interest 😍
Suggestion #4: Get a handle on spending
People who love budgeting (me!) and people who hate budgeting can all benefit from being mindful about spending. Prioritize the experiences and things that make you happy and be aware of how much you’re spending on the big-ticket expenses (housing, transportation, food), but also how you might be spending mindlessly on things that don’t really enrich your life. Remember those opportunity costs!
Be sure to leave some wiggle room for the fun stuff — especially because it may be harder to make friends when you’re not in the college scene anymore. I recommend allowing time and money to meet and get to know new co-workers (happy hours allow you to casually socialize and get some deals) or do something like join a gym/yoga studio where you can meet others. (I met so many friends through Crossfit – the memberships are usually expensive but I love the workouts and community. It’s worth it to me.)
No one wants to be miserable during their first “adult” year, so have some things you can look forward to in your budget. Check in with yourself consistently (possibly every month if you’re new to budgeting) so you can avoid wasting money or the dreaded lifestyle inflation that can happen after you’ve been on the job awhile.
Graduation is an exciting time! I absolutely loved my college experience — I remember how much I enjoyed all the graduation festivities and soaking up my last few months on campus. This is also a wonderful time to prepare to lay the groundwork for a solid financial future.