5 Nuggets of Financial Advice for New College Grads

Graduates at the University of Toronto, circa 1915. Source: Wikimedia Commons.

Without a doubt, you're entering an exciting time of life.

But sometimes the exuberance for it turns into cavalier spending habits that can take years to repair. Much like achieving your college diploma, financial responsibility takes hard work. But the good news is that getting a solid start is completely doable.

Here are some pieces of financial advice for doing so.

1. Limit comparisons to your peers.
Soon you'll be out in the working world making serious coin. And it feels great! But keeping up with the Joneses can start to feel like keeping up with the Kardashians. Excessive blowout weekends and "must-have" designer shoes can rack up credit card debt that'll take years to pay off. If your friends decide to go this route, so be it. You don't have to follow them down the same financially slippery slope.

2. Make a budget and stick with it.
Developing a post-graduation budget will help you stay in control. You can crank open a spreadsheet template and make your own or use existing free ones. For example, Intuit's Mint.com can help you set goals, see where your dollars go each month, remind you to pay bills, and warn 
you if you're going over budget. Getting into the habit of tracking your money on a regular basis will serve you well for years to come.

3. Build credit responsibly.
Open one or two credit cards and use them every couple of months to demonstrate that you can pay your bills sensibly. Pay them in full and on time -- no ifs, and, or buts about it. Avoiding credit card debt from the get-go is the single greatest financial move you can make. Clearly separating your needs from your wants will help.

Many credit cards give cash back, while others offer rewards for on-time payments. For example, JPMorgan Chase's Chase Freedom card offers 5% cash back on up to $1,500 spent on categories that rotate every three months. And Capital One Financial's Journey Student Rewards card gives a 25% bonus on your cash back when you make an on-time payment. Both cards boast no annual fees and grant 1% cash back across all purchases. 

4. Tackle student loan debt.
Since many student loans don't require repayment until after graduation, paying them down is probably a novel concept. Making the minimum student loan payment is required. But paying more than that amount each month will help those loans disappear even faster. That way you can more easily save for future financial goals.

5. Get a jump on retirement savings.
If your employer offers a retirement plan, like a 401(k), start contributing from day one. Better yet, contribute at least enough money to take advantage of your employer's match (assuming they offer one). You probably won't even notice the money being diverted from your paycheck. But years down the road you'll be amazed by the amount of wealth you've amassed.

Foolish final thoughts
Developing good financial habits early in life is critically important. Stick with these five nuggets of financial advice. By doing so, you'll not only save yourself a ton of headaches, but also get a huge jump on building some serious wealth.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 01, 2013, at 11:13 AM, BayAreaBill1 wrote:

    This article doesn't mention the single most important decision, one that must be made before college enrollment.

    Choose a major that pays well, is in high demand, has good job security, and that is not unpleasant or overly demanding. There are jobs like this, particularly in engineering, accounting, and health care professions such as registered nursing or nurse practitioner.

    If you don't study the right major from a first rate university (NOT ONLINE!) then you are screwed.

  • Report this Comment On June 03, 2013, at 11:47 PM, banmate7 wrote:

    My rules are similar, but here that are, in order of precedence:

    1) Be patient...and learn how to leverage time.

    2) Understand cash flow, balance sheets, interest rates, amortization, and, if possible, value investing in stocks & dollar cost averaging into low cost index funds. Basically, you should know how to manage money.

    3) Avoid debt. Basically you should know how to prevent money from managing you.

    4) Save & invest...this follows from #1 & #2 above.

    5) Do some in demand trade real well, especially with your hands, as opposed to mostly your mouth. Plumber, software engineer, doctor, lawyer (trust me, a good lawyer has skills beyond impeccable locution), hi-tech robot maintenance, etc. Be able to perform a "craft", like a "craftsman".

    6) Get as much education as you can...but be practical & don't get into too much debt.

    Best of luck.

  • Report this Comment On June 07, 2013, at 2:14 PM, ginnya wrote:

    1) Build and keep an emergency fund

    2) Invest in a "pantry" for staples. Use some of the weekly food budget to "stock up" on staples when they are deeply discounted. Besides the benefit of a lower price, once a pantry is established you'll never run out and seldom have to pay full price again.

    3) Forget spending like your peers--open your eyes to others with happy lives that are spending a lot less. For me it was my grandparents who survived the Depression or the characters in Mama's Bank Account or other novels.

    4) Volunteer in your community. It is usually low cost and keeps you too busy to shop for entertainment.

    5) Consider used items to furnish your new place. Estate sales can have good quality furniture for a fraction of the new and new furniture depreciates quickly.

    6) Spend below your means and save and invest the rest.

    7) The most important: set your priorities. Most of us can't have everything. Set aside the good and focus on the best.

  • Report this Comment On June 08, 2013, at 8:45 PM, Zombie111 wrote:

    Good article and comments, which are required to counter-act "the forces of evil" i.e. all the pressure to consume like there is no tomorrow (which is why religious people who believe the apocalypse is nigh tend to max out their credit cards).

    Also, from personal experience, sooner or later there will be an emergency.

  • Report this Comment On June 09, 2013, at 3:24 PM, bobbyk1 wrote:

    I gave my son similar advise.He throws in 16% to his 401k which has a 9% match.I would add I think they should buy a house.

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