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How to Save Money After Graduation















11 Personal Finance Tips for College Grads

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.

Mapping  out your budget is a great way to help you quickly uncover whether you’re on  the rocky road to spending more than you make — as I was for a while after  college.

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.)

3. Move in with your parents  to keep housing costs down.

This  presumes they’re cool with the idea and won’t charge you rent. You’ll then be  able to devote the money you save on housing to cutting your debt and  increasing your savings.

I moved  in with my mom and dad after college and was enormously grateful they let me  stay rent-free; to return the favor, I helped out with the cooking and ran  errands.

Not  having rent payments let me squirrel away money, start an emergency fund and  have enough cash for the one-month security deposit necessary for my first  rental, a room in a group house with three other women in Washington, D.C.

4. Steer clear of debt. 

As  my eight nephews and nieces know, this is one of my favorite mantras: “Debt is  a dream killer.” 

If  you’re not saddled by debt payments, you’ll be more nimble and able to pursue a  wider array of career opportunities.
Debt  can stop you from taking a job you might love because the salary won't be high enough to meet your monthly obligations.

It can  even shut the door on a job offer altogether, because an increasing number of  employers are checking prospective employees’ credit reports as part of their  due diligence.

I admit  this anti-debt advice will be tough for many new grads to follow. A recent Fidelity  Investments study found that a stunning 70% of the class of 2013 is  graduating with an average debt of $35,200.

And 42%  of Millennials polled say their debt is “overwhelming,” according to a new Wells  Fargo Retirement report, twice the rate of boomers who were surveyed.

5. Reduce your debt load as quickly as possible.

If  you have hefty college loans, “reframe the way you think about your debt,” says  Ken Ilgunas, author of Walden on Wheels: On the Open Road  from Debt to Freedom. “Don’t think of your debt as a monthly  bill, think of it as a sworn enemy. You need to hate your debt,” he adds.

Ilgunas,  29, speaks from experience. He managed to pay off $18,000 of his $35,000  student loan debt in one year.

But if  you can’t match Ilguna’s fierce resolve, force yourself to pinch, pinch and  pinch some more. Lowering your spending will raise the amount available to pay  off your debt.  

Adding  an extra $25 to your monthly repayments can shorten the life of your student  loan and save you interest. Making the payments through automatic  debits from your bank account can reduce the interest rate, too,  according to student-loan servicer Sallie Mae.

6. Top priority: an emergency fund

The rule of thumb from financial advisers is to try to set aside the equivalent of three to six months worth of living expenses. (Personally, I prefer a year, but that can take time to build.) Make this a personal goal.     A money market mutual fund or a bank savings account are smart places for your rainy day fund.  


7. Start investing.

No,  it’s not too soon. In fact, one of the great advantages you have over people  your parents’ and grandparents’ age is that you have many, many years ahead of  you, which means more time for your money to grow. And, historically, buying  stocks or mutual funds is the best way to do this.

The National  Endowment for Financial Education’s website,, offers  free guides explaining the basics of stocks, bonds and mutual funds. You can  also learn investing fundamentals by taking a course at a community college or  signing up for a local seminar sponsored by a group like the American  Association of Individual Investors, which doesn’t sell financial products.

8. Take advantage of your employer’s 401(k) or similar retirement plan.

Workers  under age 50 can contribute up to $17,500 to these programs in 2013. Your  contributions, deducted from your paycheck automatically, are tax-deductible  and your money grows tax-deferred until you take it out, ideally in retirement.
If possible, invest enough in your 401(k) to qualify for the full match (the amount your employer puts in as a result of how much you contribute).

Most employers require workers to save between 4 and 6% of pay to get the maximum match. Whatever the match, try to take your company up on it. Why refuse free  money?
You might be leery to commit to a 401(k), worrying about tying the money up and  thinking that you could invest outside the plan in whatever you want.

But  trust me: the automatic feature of a 401(k) trumps those concerns. You’ll save  for the future without having to think about it — and the penalties for early  withdrawals will help keep you from dipping into the money. One day you’ll  thank me.


9. Which reminds me: Don’t raid your 401(k).

I screwed this one up. When I switched jobs at age 30, I cashed out my first 401(k). Imagining what that money might be worth today, 23 years later, makes my heart sink.

10. And don’t skip health insurance either.

When  you’re in your 20s, you think you’ll never get sick or injured. But sudden  illnesses do strike  and accidents do happen.  Insurance will help you pay the medical bills.

Under  the Affordable Care Act (also known as Obamacare), you can be insured as a  dependent on your parent’s health insurance plan if you’re under 26. The  exception: If you can get health insurance through your own job.

If you  can’t piggyback onto your parent’s plan and you don’t have a job with health  insurance, you might need to buy a short-term policy. For advice on how to do  it, take a look at my Next Avenue article, “What  to Do About Health Insurance When You’re Self-Employed.”

Starting  in January 2014, if your employer doesn’t provide health insurance, you’ll be  able to buy it through one of the new health  insurance marketplaces.

11. Finally, splurge a bit on life experiences.

Sometimes,  spending for fun stuff pays dividends. (And as my Irish father always said  about money, “You can’t take it with you.”)

The summer  I graduated from college I spent $1,500 I’d saved from summer jobs to go on my  first trip to Europe, with my older brother. That experience has paid me back  with decades of storytelling and memories too rich to put a dollar figure on.

For  three weeks, we slept on trains and in youth hostels, lugging our knapsacks  from town to town and country to country. Wow, what a journey!

By: Kerry Hannon for, 2013

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