Essential Money Tips for New Grads | One Smart Dollar (2024)

Figuring out how to pay for college was only the beginning. New grads entering their post-college life need to prepare for all kinds of new adventures. One of the best and most challenging adventures is learning how to manage money. Here are the best money tips to help you tackle all those exciting financial milestones.

Start an Emergency Fund

New grads may be tempted to use their extra money to travel or make big-ticket purchases, but an emergency fund should come first. Why is an emergency savings fund so important? It’s the money that serves as a safety net! Without an emergency savings, an unexpected cost like a car repair or a medical bill is most likely to end up on a credit card, where the costs can spiral out of control. Plus, it can help you avoid needing to rely on borrowing money when you get in a bind. Your emergency fund can help you maintain your independence during a time when you might have needed to borrow from family or friends.The extra cushion of an emergency savings — even as little as $500 or $1,000 — can help you stay afloat during a tough time without relying on debt.

Create (and stick to) a Budget

Even if you haven’t graduated yet, creating a budget is the best tool to develop a plan for how to spend and save your money. You’ll want to make sure you have enough to cover expenses like rent, utilities, transportation, food, student loan payments, savings, and entertainment. Sticking to a budget will help you make the most of your new salary so that you don’t end up broke in between paychecks. A budget can also help you decide if you need to make certain adjustments to your lifestyle, like living with a roommate, to cover all your expenses. New grads who follow a budget from the beginning of their career are more likely to have a financially-secure future. It’s easier than ever with digital apps and other tools that can help you budget and track your spending on-the-go.

Take advantage of your employer’s retirement plan

Retirement may seem like ages away, but the sooner you save, the better off you’ll be. Even if you can only afford to save a little bit at first, you should always take advantage of any employer-sponsored retirement plan that comes with a match. Turning down your employer’s retirement match is turning down free money! Even if you don’t stay at the company long enough to be fully vested, your contributions will stay yours and can be rolled over to a new account when you leave. The sooner you incorporate retirement savings into your financial habits, the easier it will be to maintain as your career (and salary) grows. If your new employer doesn’t offer a retirement plan, open your own. Roth IRAs are a great choice for retirement savings for new grads.

Use Credit Cards Wisely

New furniture, a professional wardrobe, the latest technology — there are lots of large purchases that new grads need that are tempting to put on a credit card and pay off later. A good rule of thumb is not to make any credit card purchase if you can’t immediately pay it off. Since credit card interest rates are usually higher than student loan rates, any unpaid balance each month will grow faster than you expect. This could send you into a rapid spiral of debt. However, that doesn’t mean you need to avoid credit cards altogether! Focus on making your payments on-time and carrying a low (or zero) balance in order to build up your credit score. A good credit score will help you far into the future — from getting your first car to buying your first home!

Get friendly with your student loans

Student loans are no joke. Like any other type of debt, repaying your student loans on-time will help you build up a good credit score. If you’re having trouble affording your monthly payment on your federal loans, you’ll want to explore different repayment options with your loan service provider. There are other options that might be better for your specific financial situation, like an income-based repayment plan. If you’re comfortable with your monthly payments but don’t love the interest rates, refinancing your loans with a provider like Sofi might be a better choice. Whatever your situation, understanding your student loans will help you stay in control of your long-term financial picture.

New grads have endless opportunities in front of them as they take on post-college life. The most important financial lessons are all about building healthy money habits and avoidingthe most common traps. With these simple money tips, you’ll be well on your way toward financial success!