When my nephew Michael walked across the graduation stage at Wake Forest University last week to pick up his bachelor of science diploma, I wasn’t worried about his financial future.
Ever since he was a teenager he has always saved and invested the money earned from a potluck of summer jobs. (I put that down to good parenting skills and the financial lessons modeled by my sister and her husband.)
But not every recent college graduate is as knowledgeable about personal finances.
So, inspired by Mike’s Wake Forest ceremony, I couldn’t resist jotting down 11 pieces of financial wisdom that I would’ve imparted if I’d been asked to be the commencement speaker.
11 Personal Finance Tips for College Grads
Here goes:
1. Pick up a book or two on money basics. A couple that I like, written specifically for young adults, are Generation Earn: The Young Professional’s Guide to Spending, Investing and Giving Back, by U.S. News & World Report senior editor Kimberly Palmer and the bestselling Get a Financial Life: Personal Finance In Your 20s and 30s by Beth Kobliner, a noted personal finance commentator and former colleague of mine at Money magazine.
2. Pencil out a budget. After working for a few months and getting used to the amount of take-home pay (after taxes) you’re earning, figure out how much money you can afford to spend each month.
I’m not ashamed to tell you that it was scary and stomach-turning to get phone calls from credit card companies. To set things straight, I borrowed money from my older brother to erase my credit-card debt (I repaid him over time, without interest) and began using my cards only when I knew I could pay them in full each month.
After that experience, I vowed never to let anything like it happen again.
To begin budgeting, first add up the essentials, like your rent, utilities, groceries, transportation, student loans and a car loan. That’ll let you know how much is left over for other spending and saving.
Try not to eat out at restaurants too much, take taxis or spend frivolously on clothes. You’ll probably need to jump-start your wardrobe for work, but there are plenty of ways to do so frugally. Don’t forget to check out secondhand stores for lightly used clothing buys — I found a terrific black Armani suit in one for a song not that long ago. (Some smart money habits stay with you.)
Bottom line: Always spend less than you make. Websites like Mint.com and Youneedabudget.com can help you create a workable budget.
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