Oh boy, do I have a lot to say on this topic. And pretty much all of it boils down to “don’t do what I did when I was a recent grad.”
I’m pretty old for someone writing on “Young Adult Money” (37!!!!) and I really wish sites like this had been around back when I was graduating from college. So here you go, recent grads!
Congratulate Yourself
Honestly, do that. Graduating is a big deal. It may not feel like it — it may just feel like something “everyone does” — but in reality, a lot of young Americans start college and never finish. So savor the moment before getting real with the rest of this list.
Evaluate Your Debt: Find Out How Much You Have
OK, it doesn’t get much real-er than this! Here’s the thing: you cannot get into a better financial position unless you know what your financial position is right now. So start by checking out what your situation is.
It’s a lot easier to do this than it was when I was a new grad. If you’re in the U.S. and have federal student loans, they will all be listed at the National Student Loan Data System.
Private loans are a little trickier to find, but you should get a free annual credit report and check to make sure you have them all. It sounds a little crazy, but a lot of recent grads say that they were unaware they’d signed for large private loans — but even if you don’t know you have them, you’re still responsible for them. Checking your credit report is the best way to do that.
When you’re evaluating your debt, you should include any credit card debt, medical debt, car loans, and so on, as well. You might want to use an app or two to help you manage all this eventually, but I recommend getting started with a simple list on paper or an Excel spreadsheet that includes the interest rates on all your loans.
Evaluate Your Debt: Consider Repayment Options
Now that you have a list in front of you, you can think about ways to pay off your debt. Some recent grads will only have a few loans and repayment will be simple, but others may have a dozen or more individual loans and debts.
If you’re in that situation, you can consider options like consolidating your loan debt. You may also want to think about other ways to make your student debt more manageable like choosing different payment schedules or even forbearance or deferment. Those aren’t the best options because they’ll end up adding a lot of extra interest to your loans, but if you’re really stuck, they’re better than default.
The same goes for credit card and other debt: do some research on the best way to pay off debts, and make a plan to help you keep on track.
Evaluate Your Bank Accounts
A lot of recent grads have debt, but many also have some savings. Since many people start out with checking, savings, and/or credit card accounts that are meant for students, after graduation is a good time to make sure that you choose the best bank for you. Your checking, savings, and credit card accounts should all either be free, or have ways to avoid fees if you use them responsibly. That means no annual fee for credit cards, no monthly fee for checking accounts, etc.
If you decide you need to close your old checking and savings accounts, look for free versions. Online banks like Discover, Capital One 360 and Ally often offer free accounts.
Start Tracking Income and Expenses
Like the last three, this part of your checklist is all about responsibly managing your money so that you don’t end up with a big surprise. (In the personal finance world, surprises are usually bad!)
The best way to maximize your finances is to keep careful track of what’s coming in (wages, freelance income, etc) and what’s going out (everything from rent to subway fare to iced lattes.) There are a lot of ways to track your expenses so you can pick the one you think will work best for you.
Tame Your Expenses
If you’re on your own for the first time, it can be tempting to spend a lot on living by yourself, a new car, going out every night, and so on. But if you focus on keeping your expenses down by living with friends or family and keeping your entertainment spending under control, you can save for bigger and more exciting goals.
For some great ideas on how to actually cut your expenses and save money, check out our posts 30 Ways to Save Each Month, 20 Ways to Save Money In Your 20s, 6 Extreme Measures to Save Money.
Evaluate Insurance Needs
Many American recent grads are now allowed to stay on their parents’ health-care plans until age 26. If you fall into this category, you might be okay.
But you should consider whether you do need to get health insurance or other kinds of insurance (car, life, pet, and so on) and look for the best option for your situation. Recent grads often feel invincible…but trust me, you’re not!
Find a Full-Time Job
I know this can be a lot harder than it sounds. It might take a while, and you might end up needing to intern, freelance, and generally hustle in order to both make ends meet and to make connections that will lead to full-time work. But for most recent grads, finding that 9-5 job is ultimately going to be the way to generating financial stability.
I don’t have a silver bullet for you, but my best advice is to tell everyone that you are looking for a job. Literally: not just your friends, but your friends’ parents, your second cousins, the bank teller, random people you meet on the bus. Ask them what they do for a living and how they got their jobs. You might be surprised at how many ways there are to make a living.
Build an Emergency Fund
OK, I’m going to assume that you have some kind of income, whether it’s a 9-5 job or from working a few hours a week in retail. If the #1 thing you should be doing is making at least minimum debt payments in order to protect your credit score, the #2 thing you should do is start an emergency fund.
The basic idea is to have a savings account that is separate from the one you use for travel, going out to eat, and so on. It’s for the inevitable emergency: the unexpected health care bill, the plane ticket to your grandmother’s funeral, the brake job on your car, and even job loss.
Decide how much you want in there (most people start with $500-$1000, and some end up with six months’ to a year’s worth of income) and don’t worry if at first you can only sock away $25 a month. Just get started!
Start Contributing to a Retirement Account
This may seem like a bad way to use your money, especially if you have a lot of loans and/or not much income. But if you’re in your early 20s, even a small retirement contribution will add up to a lot by the time you’re ready to retire. It’s really worth it to put aside whatever you can.
There are several ways to contribute to a retirement account, but if you have a job where your employer matches your contributions, you should start with contributing whatever is necessary to get to that match. Talk to your HR office today about what you need to do.
Figure Out Your Goals
This is where it gets really personal: what do you want out of life? There are goals like paying off debt, buying a house, travel, having children, reaching financial independence, and many more. If you figure out what goals you have, it’s much easier to figure out how much money you might need to meet them and how to set it aside.
Keep in mind, not every goal involves the same amount of money. If your housing goal is a tiny house in the woods, that’ll be much cheaper than a condo in downtown Manhattan! You can tweak your financial goals to fit the kind of life you want to live.
Build Your Income With a Side Hustle
More and more people are finding that a single 9-5 job either isn’t available, or doesn’t provide enough money to meet their bigger goals, like paying down debt, saving for a house or travel.
If you’re in that boat, you can try asking for a raise at your current job. But you should also consider getting a side hustle or three in order to supplement your main income. There are a lot of advantages: if your primary income stream dries up, you’ll still have others; you can pay down debt faster; and you can meet your goals faster.
How did you manage your money when you were just out of school? What would you recommend to today’s grads?
Check out some of our favorite personal finance resources:
Are you getting the best credit card rewards? Check out the top cash back credit card offers (updated daily)
Make extra money: 15 ways to make money from your computer
Get the First Chapter Free!
Join our online community and get the first chapter of the book Student Loan Solution absolutely FREE!
I agree that I wish these sites had been around when I graduated! (Maybe they had similar ones 10 years ago but I was not aware of them!). I wish someone had told me the importance of funding retirement accounts right when I graduated. I didn’t get serious about them until 3 years ago and I think of all the time I wasted! Hopefully other people can learn from our mistakes :)
Great ideas all around, Catherine. The biggest recommendation I have for young people is to continue to live like a college student after landing a full-time for as long as you can stand it. Once you allow yourself to inflate your lifestyle, it is almost impossible to trend back in the other direction.
My favorite of your suggestions is the creation of goals. It can be easy to think that finishing college is the finish line rather than a springboard into the next chapter of life. Those first few months and years can be critical toward setting the tone for young adulthood.
Same as FinanceSuperhero…live like a college student and don’t inflate your lifestyle even though you’ll be tempted to. I was fortunate that my father instilled these frugal values on me and also encouraged me to open an IRA as well as contribute to my 401k plan. Many of my peers said they couldn’t afford to save for retirement and they had plenty of time to catch up later on. The magic of compounding is amazing if you start early…so Start Early!
Super helpful checklist! I wish I had it when I graduated :) I was so clueless.
This checklist is really helpful. I wish I had this or thought of this checklist before I graduated school. But I believe that newly graduates can really benefit from having and executing this checklist. I particularly like setting a goal. Although setting one is somewhat difficult knowing that recent graduates don’t know where they would fall into the business world or are just starting out, there is always a room to set a goal. I do believe that having a goal (even a vague one) is better than not having one at all.
Great post! I wish I started hustling and taking all of this advice earlier in life.
Congratulate yourself, do this first as mentioned. You just completed a major accomplishment. It’s seen so common nowadays that it’s just brushed over. You graduated college with your degree, big accomplishment!
Tracking income and expenses is a SUPER helpful tip. It’s what I do versus a set budget. Many recent grads feel uneasy about doing budgeting. You don’t necessarily have to have a set budget…but do make sure you’re tracking income and expenses.
In addition to signing up for your employer 401k, make sure to get a Roth IRA! (Vanguard & Fidelity are good picks. If you feel super overwhelmed by investing, start with a robo-advisor like Betterment!)
I wish I had a checklist like this when I graduated. I was lost. I wasn’t even thinking about a lot of these things because I was just happy to be done with college.
This is a great list. The advice would be helpful to anyone. I’m in my 30s and not a recent grad and some of this stuff definitely applies to people in my age group.