As part of my internship, I was asked to write an article about how newly college grads should spend their money. While I’m only half way through college, I like to think I have matured in many ways since high school. While many people can say they had the “time of their life” in high school and college, I realize that finding success and happiness after college is just as if not more important.
Moving forward, here are 6 pieces of advice I can give to my fellow colleagues and millennials:
1) Be frugal
There is a saying: “live below your means.” For the first time, you are working a job that pays well above minimum wage. Don’t blow your first paycheck on fancy clothes and other ridiculous accessories. Also, going “out” every night could become a costly hobby. Instead, make a budget and stick to it. For example, learning to cook is good for the soul and it will keep you from having to buy lunch and dinner every day. Pickup different hobbies such as reading or playing a musical instrument or whatever. As for the weekends, it’s okay to have fun but remember, you’re an adult.
2) Maintain Your Credit Score
Maintain your credit score like your most prized possession. Be sure to pay bills on time. Banks and credit card companies will use your credit score to measure any risk in lending you money. They can also use your credit score to see whether or not you qualify for a loan, the interest rate on that loan, and the credit limits. Bad credit can not only make it difficult to get a loan, but it can also turnoff future employers.
3) Get Health Insurance
When you graduate from college you are sanguine, happy, and you believe you’re impervious to human illness. Don’t be mistaken, you are not. Illnesses, accidents do happen and medical bills can get very expensive. Under Obamacare, you can be insured as a dependent on your parent’s plan if you’re under 26. The exception is: if you can get health insurance through your own job. If you don’t have a job that offers health insurance, it behooves you to find a short term policy.
4) Manage your Debt
In Greek mythology, Sisyphus was punished by the Gods for his trickery and dishonest ways. In the afterlife, he is forced to push a huge boulder up a hill, only to watch it roll back down and have to walk all the way back and do it again, for eternity. Metaphorically speaking, this could be you in twenty years. If you don’t pay off your student loans quickly and on time, it could feel like a seemingly endless struggle.
Due to rising tuition rates, families are borrowing more and more money to pay for college. The seemingly exponential increase in tuition costs is a result of a plethora of factors: including increases in faculty salaries and facility expenses. Unfortunately, as of 2016, the average student loan debt is nearly $40,000. It sounds over simplified but treat your debt like an extra mortgage. Paying $500-$700 a month instead of $100-$300 could be the difference between repaying your loans in five years versus five decades. Don’t put it off!
5) Save for Retirement
“I enjoy waking up and not having to go to work, so I do it 3 or four times a day,” Says comedian, screenwriter Gene Perret. Uncanny as it sounds, the best time to start saving for retirement is when you first start working as a newly college grad. It’s a lifetime away, but your future self will be happy that you did it. When you find a job, look to establish a 401K. Your basic 401(k) is an employer-sponsored retirement plan that allows you to save and invest a portion of your paycheck before taxes are taken out. When an employer offers a match, they are matching your contributions, often up to a certain percentage of your income. There is another account you can setup, a Roth IRA. When differentiating between these two accounts, think about it in terms of Pre-Tax (traditional 401K) and post-tax (Roth IRA). A Roth IRA is an individual retirement account allowing you to invest up to $5,500 a year. These accounts are ideal for young investors who can benefit from decades of tax-free compounded savings.
6) Automate Your Checking Account
Furthermore, if you are one that really struggles to pay the bills, it may benefit you to automate your checking account. This of course depends entirely on when and how you get paid. If you get paid once a month, you can automate your checking account so that as soon as money is deposited there, set fractions will be sent to your Roth IRA, 401K, and any other accounts you setup. Financial Advisors and clients alike love this!
Money can’t buy happiness, but it makes things easier. Learning to manage your finances is among the first steps to adulthood. So be smart, wise, and frugal. And whenever you feel like giving up, remember Sisyphus!
