10 Budgeting and Personal Finance Tips for New College Graduates

It’s graduation season, and many new college grads will (hopefully) be starting their 1st job, if they had any luck in this somewhat weak economy.

For many new graduates, along with starting a new, full time job as they enter the workforce for the first time will come the first real, steady paycheck.

When the money starts to come in regularly, it is very easy to want to start buying things you feel like you can “afford” now that you are making money. However, it can be easy to get into financial trouble with that type of mindset- some people have trouble making the adjustment to a new and frequently larger source of income.

Here are 10 personal finance and budget tips for new college grads.

1.) Make a Budget- Creating and living on a budget is an important step in controlling your finances and spending less than you earn, the key to financial success. You can spend money on things you want, recreation, and socializing, but you have to live within your means and place limits on the amount you spend in those categories. Check out my article on why budgets are important for links to some personal budget worksheets you can use to set one up.

2.) Start slow- First off, take things slow with your new found source of income. You don’t have to start paying for meals & drinks for everyone, now that you can afford it, nor do you have to buy yourself a whole new wardrobe now that you are a member of the adult work force. Take things slow with your spending, and you’ll likely realize you don’t really need to spend as much as
you think.

3.) Resist the urge to splurge- If you’ve gone through life thus far without much money, it can be tempting to splurge some on yourself with your new source of income. Limiting your shopping opportunities, including online, as well as keeping yourself busy, can help resist the urge to splurge on things you don’t really need.

4.) Wait on the new car- For a lot of graduates, a new car is one of the first things they want to buy when they graduate, especially if they’ve been driving around an old “beater” while still in school. If you have a drivable car, waiting as long as possible is a smart money move, as well as buying a used car instead of a new one.

5.) Check and pay attention to your credit report & credit score- Now is the time to start building credit, so be careful when signing up for credit cards, taking loans, etc. Keep up to date with your payments, and don’t let your credit card balances get too high. Here’s how you can check you credit report regularly for free.

6.) Assess your debt situation, and start paying it off-If you were lucky enough to make it through college without any debt, hats off to you, you’re doing great. For many though, both student loans and credit card debt can pile up while in school. Now is the time for focusing on what debts you have, especially bad debts like credit cards, and start paying them off aggressively.

7.) Start investing for retirement- The magic of compound interest is on your side as a young adult. The earlier you start investing for retirement (and the more you save, of course), the sooner you will reach financial freedom.

8.) Rent for a while or live at home- Don’t be in such a rush to buy a place to live either, whether it is a house or condo. The housing market is still struggling, and may go down further, for all anyone knows, and you may not want to tie yourself down to a city or area when you are young. Living at home is not a bad idea, either, and can save you quite a bit of money-which you can save for that down payment when you are really ready to buy a place to live.

9.) Work hard- and as much as possible-Work hard- don’t expect things to get handed to you, and start thinking about your job as a “career”. Getting ahead at work and becoming known as a person who “gets things done” will do wonders for your future salary increases.

10.) Save, Save, Save!!- As someone who did not do much saving for the first 5 to 10 years out of college, let me tell you- emergencies and “rainy days” happen a lot more than you think. As with investing for retirement, the sooner you start, the better off you will be financially.

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With the advent of the cell phone, computer, and internet, anyone can start a small, part-time business these days. You can get a website or blog up and running in a matter of days, provide services over the internet, or sell a product or item all over the world on eBay. You can also go old-school and sell products, services, or knowledge in your local community. Starting a part-time side business can be a great way to supplement your current income, dip your toes into entrepreneurship, or to begin your journey towards becoming self-employed. Whether you are entering the field of e-commerce, moonlighting at what you do during your day job, selling on eBay, performing website design, or mowing lawns in your home town, there are several keys which can greatly increase your chances of creating a lasting, enjoyable, and profitable business.

Do something you are passionate about or at least enjoy

What are you really passionate about? Do you have hobbies? Can you turn them into a money making opportunity? Even if you are not passionate about something, you have to at least enjoy it enough to be willing to trade your time and energy for the money it provides. I know several guys who mow a few lawns on the weekends for extra spending cash even though they have full time jobs that pay them pretty well. Why do they do it? Because they actually enjoy it, to some degree, getting outside and getting a little exercise-or at least enjoy it enough for the money they make doing it.

Don’t wait for the perfect time

The perfect time will always be sometime in the future. Go ahead and start now. You will never have enough time if you wait until next year, or until your kids are a little older, or until you finish up that big project at work. A lot of people become successful at a business by just starting and working at it.

Create a plan

Starting a business or part time venture without a plan is akin to taking a long trip without a map (or I guess a GPS unit in this day and age). How many hours a week do you want to work? How much money do you want to make per month? What are your goals 6 months, 1 year, and 5 years down the road? These questions, and ones like them, need to be answered to provide you guidance with your venture.

Be prepared to work

Lofty goals are nice, but don’t expect to make a lot of money without putting in long hours and hard work. It can happen, but it doesn’t happen enough for it to be very likely. The majority of the time, being successful is directly related to the amount of time and energy you put in to a project.

Start small but think big

Starting small is great, you can start off working part-time, at your convenience. But don’t forget to think big. If you want to expand your part-time venture into a full-time one, you have to set goals with the big picture in mind. When the amount of work gets too much for you to handle by yourself, consider bring in another person or part-time help to assist you.

Don’t Forget to Market

No matter how small your business or service is, or how good or useful it is, you still need to market it to others. Make up business cards, print flyers, use word of mouth, or the internet to tell others about your business. Ever notice how much large, established companies market with commercials, ads, etc? There is a reason for it.

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There are many people that believe you need to “show off”, drive a fancy car, wear designer clothes, and generally spend money to make a good impression or to impress other people. The truth is, you don’t have to spend a lot of money to make a good impression. People develop an impression of you by how you present yourself and interact with them and other people. Especially in the workplace, making a good first impression is important, as well as how you present yourself on a daily basis. Here are some of the free or low cost things you can do to make a good impression.

Practice good personal hygiene- Taking a little pride in your appearance can go a long way. Keeping your hair neat and not disheveled, your nails trimmed(if you are a guy) and clean, and paying attention to other small but important aspects of your personal appearance gives off a good first impression. Showering and brushing your teeth on a daily basis is a necessity as well.

Keep your clothes clean- You don’t have to go out and spend hundreds or thousands of dollars, but keep your clothes clean, neat, and wrinkle free. Ditch the faded clothes at work, wear those around the house or on weekends. Today’s business casual has gone far enough, you don’t need to push the envelope with it either. Wear nice looking shoes, and keep them clean and/or polished.

Speak clearly- You don’t have to be a loud mouth, but speaking clearly, slowly, and loud enough to be heard and get your point across can help your personal and business relationships. I have always been a little quiet, but when I speak more clearly and with a little authority, I notice a difference in the way my words are received.

Keep your car clean inside and out-Whether you are taking a client out or just a friend, your car can say a lot about you as well. it doesn’t have to be fancy or expensive, but keep it fairly clean on the outside, throw away all of the fast food wrappers, and vacuum it regularly.

Keep your house and yard neat- Similar to other aspects of your life, and nice, well-manicured front yard and a neat, organized household makes people feel comfortable. While your co-workers or clients may never visit your house, your friends and relatives probably do, and if you keep your house neat, you won’t have a problem inviting others over either.

Be a good listener- People like to hear themselves talk and be listened to, and if you dominate the conversation, you can easily rub a person the wrong way.

Be responsive- Return phone calls and emails as soon as possible, it makes others feel important, or that they are important to you, when you respond to their needs or requests in a timely fashion.

Don’t lose your cool- Try to remain calm and collected, even when you are irritated or aggravated with someone else. You will appear to be under control, and show that you are not a loose cannon and can handle pressure- a good trait to have.

Be punctual- Don’t be the guy (or gal) that is always late for meetings, late for work, etc. You can quickly develop a reputation as a person who is not reliable.

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One of keys of achieving a comfortable retirement is starting your retirement saving as early as possible. As a new graduate, you may make more money in the next year than you have in your entire life thus far. When you think about it, it can be quite exhilarating. But…., before you make grand plans for your increased income, even if they are practical things you may want or need like a new car or saving for a down payment for a house, think about your future and retirement plans for a few minutes.

How long do you want to work?
Do you want to retire early?
How much will I need for retirement?
Do you plan on getting married and maybe having children?

Whatever the answers may be to the above questions may be, NOW is the best time to start saving for your retirement goal. The power on time and compound interest are on your side, so the longer you wait the more difficult it will be to achieve your retirement goals.

How do I Start Saving for Retirement Now?

Fortunately for you and the rest of us, there are two great options available that stand out above any normal saving or investing you could use to save for retirement, the 401k and the Roth IRA, and they each have advantages.

Investing in an employer sponsored 401k plan:

A 401k is a tax-deferred retirement plan in which you make tax free contributions now, and pay tax on your withdrawals during retirement. Most employers offer a 401k plan, and the majority, but not all, offer some kind of match. This match is free money. Some will offer a 100% match up to a certain percentage, while some will offer a 50% match for each dollar you put in, up to a certain percentage. The contributions you make to your 401k plan will come out of your paycheck tax-free, meaning you do not pay tax on this now. By not paying tax on your contributions, the actual decrease in your paycheck is less than the amount you are putting into your 401k. For example, if you are in the 15% tax bracket, to put $100 per paycheck into your 401k will only decrease your take home pay by $85.00. This should allow you to put a little more than you might otherwise be able to, and you should. At a minimum, you should enroll in your employer sponsored 401k and invest the amount required to get the full match from your employer. Most employers will let you participate from the beginning, although some make you wait a certain period of time. As soon as you are eligible, start contributing to your 401k at your new job.

Opening and investing in a Roth IRA-

A Roth IRA is a self-directed retirement fund you set up and contribute to yourself. A Roth IRA is funded with after tax contributions, but your withdrawals during retirement, both principle (your contributions) and interest, will be tax-free. If your employer does not offer a 401k or does not offer any kind of employer match, a Roth IRA is a great place to begin your retirement savings. You should also consider opening a Roth IRA for any amount you are able to contribute from your salary above the amount required to get the employer match for your 401k plan. Because you will likely be in a lower tax bracket now than later on in your career, investing in a Roth with after tax income will not have as big an effect now on your take home pay as it may in the future.

Why both?

Investing in both a 401k and a Roth IRA allows you to diversify the tax treatment of your future retirement income. Money from your 401k will be taxable when you withdraw it, while money withdrawn from a Roth IRA will be tax free. By focusing on your retirement and starting now, you can set the foundation for the retirement you want in the future.

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Just about everyone wants to “get ahead” at work. Anything you can do to make yourself stand out (in a good way, of course) can help you advance your career and increase both your job security and your salary. But just being a 50+ hours a week person doesn’t always help you accomplish your goals, and can lead to getting burned out as well. After a certain number of hours per week, you definitely lose efficiency and the law of diminishing returns applies.

To keep yourself fresh, more efficient, and on the path to success, you need to find ways to go the extra mile while limiting the amount of time spent at work, or to work more efficiently. Here are 10 ways to get more things accomplished without putting in more time on the job.

Work smarter- Think before you start a task or project. Think about the proper steps that you need to execute in order to ensure a successful outcome. List all of the tasks you need to complete in the order they need to be completed, and get them done. Spend some time thinking about the results you want, and how you will accomplish that goal.

Follow the Pareto Principle- The Pareto Principle says that 80% of the results come from 20% of the effort. (actually 80% of the effects come from 20% of the causes) While the 80/20 ratio is not an exact science, it is true that spending time on critical actions can produce more results than other less important actions. Figure out what the key 20% of the effort is to produce the maximum results, and focus your effort there. Take care of the details and finishing touches at the end, don’t focus on them in the beginning.

Delegate- Don’t be a workplace martyr, feeling that you have to do everything yourself. Delegate the tasks you are able to, especially the tasks that are time-consuming but can be done by others.

Take breaks- Get up from your desk several times a day, at least every two hours, and take a 5 or 10 minute break. Walk around and go outside and get a breath of fresh air. Your eyes, body, and mind will appreciate it.

Cut down on distractions- Don’t let phone calls, emails, or your co-workers distract you when you are “in the zone”. Screen your calls, only check your email a few times a day, and close your door if necessary to let you your co-workers know you don’t want to be disturbed. Don’t waste time surfing the net for 5 to 10 minutes every hour, only allow yourself 1 or 2 designated times a day to get your web fix.

Look for more efficient ways to do things- Don’t be afraid to think outside of the box or speak up if you think you have a better, faster, or easier way of doing things; try to think of ways you can get your work done more efficiently.

Don’t put off small tasks that can be completed quickly- If an email can be sent or a phone call returned in just a few minutes, do it and cross it off of your list, don’t wait until tomorrow.

Use technology to your advantage- Use spreadsheets, templates, email, file sharing, and other technology to your advantage by automating or standardizing certain tasks, to share files, or interact with team members. But use them to be more productive, not just for the sake of using them.

Ask for input, suggestions, and even help–don’t be an “island”-Don’t be afraid to ask questions or ask for help. You can waste a lot of time working on a task when you might not be doing it the right way. If you are unclear of what exactly you need to do or the proper methodology, don’t sit there spinning your wheels, ask someone what the proper way to proceed is, whether it is your boss or a co-worker.

Keep meetings to a minimum, work on execution instead- Long meetings can sap your energy and frequently accomplish very little. You don’t need a weekly progress meeting to find out what someone did the week before and what they are going to do in the upcoming week. A 2 minute phone call with individuals can often accomplish the same thing a 1 hour meeting with 5 or 10 staff members.

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With graduation season here, thousands of bright-eyed (O.K., at least a few might still be bright-eyed) new graduates are entering the workforce for the first time, embarking on their new careers or vocation. Quite a few will make more money in their first year out of college as they have over their entire lives thus far. When you look at it that way, it is not so surprising that many recent graduates get caught up in a spending frenzy, purchasing a new car, wardrobe for work, with many entering the “hyper-consumerism” sector as well as the workforce. The start of your career is the perfect time to start implementing good money habits and building wealth. Here are 10 great ways to start off on the right track with your personal finances.

Create a budget and stick to it-

Based on your new salary, whatever it may be, create a budget and stick to it. You can adjust your budget as the months go by, but you will have a hard time keeping your finances under control without it, especially when you first start your career. Starting now will lead to far less problems in the future.

Start an emergency fund-

Setting up an emergency fund will keep you from falling into debt when unexpected “emergency” expenditures come into your life, as they always do. Check out Emergency Fund 101 to learn more about why you need one and how to start one.

Save as much for retirement as possible as soon as you start working-

When you first start out, try to maximize your retirement contributions, to the greatest extent you can. By starting early, the power of compounding interest, and time, will allow you to build wealth much easier than someone even five or ten years older.

Don’t get caught up with the credit card shuffle-

It’s OK to have a credit card, or even two or three. The problem starts when you start abusing them and using them to purchase things you cannot afford. If you don’t have the money to pay for something, set a savings goal and save up until you have the cash to pay for it.

Don’t upgrade your lifestyle right away-

There’s no need to start “Keeping up with the Joneses” right when you start your career, although many people do, as I did myself. You have plenty of time to save up for things you want or think you need, there’s no need to rush while you are still trying to find your financial footing.

Start checking your credit report on a regular basis-

Now is also the time you will likely begin to really build your credit report, so take care of it. Check out www.annualcreditreport.com (this is the one and only government- sponsored free report site) to assess your credit report and do it on a yearly basis.

Avoid taking out loans to pay for things-

It’s OK if you are buying a house, or even a car, but for a car try to limit the length of the loan to 3 years, or even better, save up and pay cash. Definitely don’t finance other consumer items, such as furniture, electronics, etc.

Pay attention to your student loans-

If you have student loans, don’t neglect them. Also, don’t defer them if you are able to start paying them off right away, as they are still accruing interest. Look into loan consolidation as well, as you may get a better interest rate if you consolidate.

Set financial goals-

Whether it is a down payment for a house, or certain retirement savings goals, set some goals and try to achieve them. If you don’t set goals, you will find it hard to achieve your financial dreams.

Keep your life and finances simple-

Try to live simply and frugally, and you will keep more of your money in your pocket. Don’t over-complicate your finances either.

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 There is plenty of  advice floating around for “standing out” in the workplace to increase your income, or “getting ahead” in life. While many of them do have merit, it can be difficult to sift through them all, to determine which ones may be the most beneficial, and even harder to implement them and turn them into habits of your daily life. Of all of the advice I have read on these topics, there are two “habits” one can develop which I believe really stand out above the rest. They can be applied to your corporate job or if you are self-employed, and can even help you develop better professional relationships with others.

Do Things That Others Don’t Want to Do or Will Not Do- If you are willing to do things that others find unpleasant or difficult, you will always have a job.  It doesn’t matter what type of work you do, whether you work for someone else or are self-employed, or your education, or whether you perform manual labor or are a rocket scientist. If you can do things that others won’t or don’t do, or makes them uncomfortable, you will never lack for work. No matter what profession you are in, you will eventually make more money than your colleagues in the same position as you who do not do what you are willing to do.

• Tackling the “tough problems”, or difficult clients at work will make you an invaluable resource.
• Performing the difficult tasks, that no one else wants to do, but that must be done, practically guarantees you employment.
• Even if you are self-employed, solving difficult problems for others will keep your services in demand forever. Find a problem and develop a solution and you have created a market for yourself.

Do Things Without Being Asked- Elbert Hubbard, back in 1899, in the introduction entitled “Initiative”  to his essay A Message to Garcia, stated :

THE WORLD BESTOWS ITS BIG PRIZES, both in money and honors, for but one thing. And that is Initiative. What is Initiative? I’ll tell you: It is doing the right thing without being told.

Taking the initiative will allow you to “stand out” above the crowd, as a self-starter who can get things done. It is difficult, however, as taking the initiative also “puts you out there”, open to criticism, etc. You are taking the responsibility and making decisions to get things done. But the rewards certainly outweigh the negatives.

• Taking the initiative allows you to work basically independently, without your superiors having to look over your shoulder. If you ask any boss or supervisor, employees who can do this are worth their weight in gold.
• If you are self-employed, it allows you to take advantage of opportunities presented to you for your client’s and your benefit. Making that one extra phone call, or doing that little bit extra, even when you are ready to go home, can be the one that leads you to a new client or new opportunities.

Most successful people in life, I would think, implement at least one if not both of these habits to some degree in their lives. Developing them as habits in your daily life is not easy, as I have been trying to get better at both of them for quite a while, but the rewards, both monetary and professionally, are well worth it.

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Whether you realize it or not,  everyday at your job is an opportunity to “market” yourself to your colleagues, superiors, clients and others. Frequently, and I know I do this myself, we can get in a rut working in the same office environment day in and day out, and it is hard to stay or even sometimes get motivated to “stand out”. But by understanding that the way you present and handle yourself in the workplace is what defines the type of worker people see you as and taking little steps to present yourself as a serious, confident, and capable worker and leader, you will increase your opportunities in the future for promotion and a higher salary. 

Don’t be a clock puncher- Even if you don’t pay attention to when people come to work and when they leave, rest assured someone, probably one of your superiors, does.  Arriving at work 5 or 10 minutes late everyday and leaving 5 or 10 minutes early tells those around you that you don’t take your job all that seriously. By coming in just a few minutes early, and not running for the door at 4:55 p.m., but staying 10 or 15 minutes later, you will become someone who cares about getting work done and not ready to “fly out the door” when 5:00 p.m. comes.

Take responsibility-don’t play the “blame game”- If you make a mistake with something, own up to it, be honest, and move on.  Everyone makes mistakes. Be honest when you “screw up”, and learn from the experience.

Don’t be a “yes man”- Don’t be afraid to speak your mind or give your opinion when you are asked by others.  You will be respected for your honesty.

Don’t rock the boat, either.- On the other end of the spectrum, however, you also do not want to be known as a complainer or a pessimist, always disagreeing with others and the way the may be donig things.  There is a differnece between constructive criticism and plain old criticism.

Network relentlessly-Even if you are a shy person, it is to your benefit to meet and talk with as many people as possible within your company and professional field.  You never know when an opportunity for yourself or your company is going to present itself just because you decided to be friendly with someone and talk with them. Make it a habit yo seek out new people and develop relationships with them.

Be a self starter- Don’t waste time thinking how you are going to start a project, just go ahead and
 start it.  If you waste too much time pontificating different approaches or thinking about something instead of actually doing it, you will set yourself up for trouble.  Start a task right away, and seek feedback on your approach or results.

Use your strengths, but work on improving your weaknesses.-  Are you not so good at managing people but proficient technically?  Then shine with your technical ability, while working to improve your management skills.

Keep a list of your accomplishments, accolades, etc.- Be ready when review time comes, and don’t be
afraid to toot your own horn.  Your boss may have forgotten how well you completed that project back in February,
as he probably has other things on his mind while he is doing your performance review. (possibly even his own review with his boss).

Delegate to Others- Just because you can do something yourself doesn’t mean you always should.  A good leader knows what to delegate, when to delegate, and who to delegate tasks to.

Assist others, within reasonable limits, whenever possible. Don’t let your work suffer as a result, however. No when to say “no”.

Dress for Sucess- This doesn’t have to cost a lot of money, but dressing nice and keeping your appearance clean and neat helps you promote a professional image.  

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