Five tips for new college graduates to manage their finances

Work out a budget, save smartly, build your credit score and learn from mistakes, experts say

Even if new graduates are paying off debt, they can start to save for retirement right away. Getty

For new college graduates, receiving that first post-degree salary can be almost as exciting as obtaining the diploma itself.

But it also presents a challenge: Given the many demands on a young person’s budget, how should those funds be managed?

We asked five money experts to share their best personal finance strategies to help this year’s college graduates successfully launch their financial lives. Here’s what they said.

Find your budgeting style

To figure out how to allocate your money towards needs, wants and everything else, Erin Lowry, author of the Broke Millennial Workbook, says that instead of following the latest budgeting trend on TikTok, it is helpful to just sit down with a pen and paper.

“Write down what your big expenses are,” she says.

After accounting for large items such as rent, car payments and food, you can then see what non-essentials also fit.

“You might want to go out to dinner with friends, build up new work attire or adopt a dog,” Ms Lowry says.

Writing out the budget helps you figure out what you can afford and when, she says.

“We conceive of budgets as restrictive things that keep us from having fun, but you should be thinking of it as a way of controlling how your money is spent. If you don’t know, you’ve sacrificed all control,” Ms Lowry says.

Save smartly

Even if they are paying off debt, Alex Rezzo, a certified financial planner and the founder of Andante Financial in Los Angeles, urges new graduates to start saving for retirement right away.

“There will always be a more immediate excuse to delay saving for retirement,” he says, but he urges people to find a way to save at least 1 per cent of each salary and to increase that amount over time.

He also suggests parking your direct-deposited salary funds in an online bank that offers a competitive high-yield account.

That way, the money could earn more than it would sitting in a traditional bank’s checking or savings account.

Protect your credit

As you build your independent financial life, making at least the minimum payments on your student loan and credit card accounts can help to protect your credit.

Missing a payment could damage your credit score, Ms Lowry says.

She suggests focusing on paying down any high-interest debt first to reduce the total amount going to interest.

Ms Lowry also suggests freezing or locking your credit, which makes it much harder for identity thieves to apply for new credit in your name.

Just remember that if you freeze your credit, you will also have to thaw it if you want to apply for credit yourself, she says, adding: “You might want to wait until you’re through a period of time when you’re applying for new accounts.”

Make mistakes and learn from them

Kennedy Reynolds, chief education officer at Acorns, a financial services company, says mistakes – whether it is overspending or accruing credit card debt – are part of the learning process, but the key is to learn from the experience.

Pursuing additional income streams outside of a pay cheque can help grow wealth

Linda Whiteman,
personal finance teacher

“If you have debt to pay down, take that pay cheque and split it up” towards those bills until they are paid off, she says.

“Try to picture yourself later and know that the choices you’re making now will have a long-term impact,” she adds.

Look beyond your pay cheque

Linda Whiteman, a personal finance teacher at Outschool, an online learning platform for children, teaches her pupils to think entrepreneurially. After all, she tells them, most millionaires are business owners.

“You don’t have to work for someone,” she says. She asks her pupils to consider what they can teach others, whether offering piano lessons online or creating digital art.

Pursuing additional income streams outside of a pay cheque can help grow wealth, she says.

Melissa Jean-Baptiste, a financial educator, found success doing exactly that: She used her experience as a teacher to create and sell lesson plans online.

“I was bringing in $10,000 a year that I could put towards debt,” she says.

Her lesson plans eventually turned into the financial literacy business that she operates today.

Earning additional income outside of a salary, she says, “can be a game-changer” – financial wisdom that applies at any age.