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Financial Advice for Recent College Graduates 

  • May 24, 2022

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College graduation season is upon us. This is the time to celebrate all of our recent college graduate’s accomplishments and welcome them into the next phase of their lives. Whether that be continued education, travel or the working world, our college graduates will face new triumphs and challenges as they grow and evolve into full-fledged adults. Here are some financial tips and tricks we’ve accumulated over the years to help graduates succeed. 

Be Aggressive with Student Loans 

Between 39 and 50 percent of students graduate with student loans. Currently, through August 2022 federal student loan payments are being paused, and interest is not accumulating. While this is not a ton of time, it’s a great opportunity to pay down as much of your principal sum as possible before it gets the chance to incur interest. Alternatively, you could put any money you’d normally be paying towards your student loans into a high yield savings account. That way your money accumulates interest during this period, then once payments resume you have a bit more money available to you for your payment. 

Some young adults are choosing to wait and see if the current administration offers student debt relief. While this might happen, it’s still best to be putting that money aside in case payments do resume. Alternately, some students are lucky enough to not have any student loans. If that is your case, use that money to help meet other savings goals you might have. 

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Start A 401K Early 

Once starting a job, you should start contributing to a 401k. While to some it might seem absurd to start saving for retirement as soon as you start working, the sooner you start investing in your future the sooner you can retire. The longer you invest, the more interest will compound over time. Take a look at your budget and see how much you can spare to invest in your future after paying other priorities, such as rent or a mortgage, student loan payments, food, credit card bills, and any other needs. Consider your 401k investment as going towards any of your savings goals. 

It’s also best to look for employment with companies who’ll match a percentage of your contributions when searching for a job. This is another great way to maximize your earnings and investments over time. 

Own Instead of Rent 

Post-graduation, most young adults will feel overwhelmed with the number of choices they have for places to live. Some will go far from home because of a job offer, and others will stay home while they pay off their student loans if that’s an option. When it’s time to move out, consider searching for a starter home or condo instead of renting an apartment. The cost of renting a place to live is something you’ll not be able to recoup, but the purchase of a home is something you’ll maintain equity in. Once you sell that home, given the normal appreciation of property, you’ll be able to recoup your investment and potentially have a return.

For most, buying a home right out of college is undoable for one person, and that makes sense. However, you don’t need to just be a married couple to buy a home either as more and more often friends and family members are buying homes together. Consider splitting the 30-year mortgage up by bedroom occupancy on a monthly basis and sharing the house amongst friends. 

Another way young people can financially support themselves when buying a home is by becoming a landlord. If you have the skills to fix the problems tenants might have, such as small appliance repairs or things of that nature, this could be a suitable option for you. After purchasing the property, you can then advertise the home to others to rent. You can make the rent enough to cover the mortgage, insurance, and taxes amongst all the inhabitants to make it a livable space for everyone. If you’re not sure where to start, there are ways to invest in real estate without having an influx of money. 

Conclusion: Financial Advice for Recent College Graduates 

College graduation season can be stressful, especially when finances are involved. However, have some faith that this will all work out the way it’s supposed to. Try to not compare yourself to other college graduates, especially in those first few months out of college. Some majors and careers will be able to get high-paying jobs quicker than others, but stay calm and don’t be too hard on yourself. Find the job that fits you perfectly, and continue to prosper socially and financially.