Post-Grad Playbook: Smart Money Moves for New Alumni

Walking across the stage and getting your diploma is just the beginning of a new stage of freedom. Not only are you done with classes and grades, you may be starting your first full-time job with a real paycheck. 

Before you venture off to this new chapter of adulthood, check out these five smart money moves that will set you up for financial success in the years and decades ahead. 

Start your career with knowledge

As you start your first job after college, make sure you understand how your new income and benefits work. The first step in the process is to consider negotiating your salary. Research starting salary ranges for your field and local area to use as a basis. Then look at the company’s recent news to gauge how flexible they may be. Recent layoffs may indicate that budgets are tight, while investor funding or stock growth could indicate more room to negotiate. Remember you’ll also have other opportunities to ask for a raise in the future, such as during your annual review or when you get a promotion.  

In addition to salary, also consider the available benefits that contribute to your total compensation. The most common benefit in the U.S. is access to a retirement plan, and some employers even provide a matching contribution when you put money into your account. Other potential benefits include short-term disability insurance, childcare benefits, subsidized commuting, and healthcare, dental, and vision care insurance policies.

Calculate the value of the benefits you’re likely to use in the next year or two to see how much your job really contributes to your financial well-being. A job that pays a few thousand dollars less may end up giving you more if the health insurance is more affordable and the employer offers a retirement match. Consider these details when comparing job offers instead of just looking at salaries.

Once you accept and start a job, your paycheck will probably look different than the offer you received. Here are some examples of deductions that may be taken out of your earnings before the number on your paycheck is finalized:

• Federal and state tax withholdings
• Medicare
• FICA
• Healthcare and dental premiums
• Flexible spending account contributions
• Retirement plan contributions

While all of these deductions benefit you in some way, they also reduce your take-home pay. Calculate your net pay as early as possible when starting a new job so you can realistically manage your money. 

Build your financial foundation 

Once you know how much money you’ll receive from your actual paycheck, start investing your time into learning basic financial literacy skills. Three important components include making a budget, creating a savings plan, and building your credit score. Let’s break down each one.

Make a budget: A budget is a plan for how you’ll use your money each month. When you’re just graduating from college, you can quickly set yourself up for success because you’re in the decision-making process for many of your large expenses. Before buying a car or renting an apartment, add up the cost of other necessities, like your phone bill, student loan payments, groceries, and more. Then see how much is leftover to help dictate what to spend on rent and transportation.

Leave room for savings: Be sure to dedicate part of your budget to savings. Begin with a $1,000 goal, then continue to find ways to save money until you have at least three to six months of expenses set aside. That way you have a safety net in case you lose your job or can’t work for some reason. Also set aside money for other financial goals, like a vacation or a future down payment on a house. 

Build your credit: As you enter the “real world,” start intentionally establishing a positive credit history. This helps you qualify for future financing, including loans and credit cards. You can do this by getting a credit builder loan or credit card or asking a trusted loved one to be an authorized user on their credit card.

Avoid lifestyle creep: When you start your first job out of college, you may be earning more money than you have ever before in your life. With that boost in income comes the temptation to spend more on non-necessities that you couldn’t afford before. 

Lifestyle creep is a common financial mistake, but it can wipe out your chance of gaining a solid financial footing. Instead, stick to your budget and clearly define how much you can afford to spend on “fun” items while still meeting your primary financial goals. 

Get ahead on student loans and debt

Once you graduate, it’s crucial to understand your student loan obligations, along with any other debt you have. First, make sure you have a complete list of all your outstanding loans. Then check to see if there’s a grace period for any of them. This gives you some time after graduation before your first payment is due. Make sure your lender has your latest address and find out when and how to pay your first bill.  

Set goals for your financial future

Goal-setting helps to make sure you get where you want to go in life. Think about long-term goals like retirement, as well as plans we already mentioned, like an emergency fund, vacation, and a future home. Depending on how much debt you may have, you could also prioritize extra payments. 

Then calculate how much of your budget you can dedicate towards these goals. A common rule of thumb is to aim for 20% of your income to split across your savings buckets. As you grow in your career and earn more, keep the same percentage of your income devoted to savings and you could make solid progress on your goals over time. 

Bottom line

As a new college alum, you have the opportunity to start fresh with your finances and create a smart strategy. Budget with clarity right from the beginning and be realistic about what you can afford with your new expenses. Avoid lifestyle creep and build a positive credit history for lasting financial success.

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