The New College Grad Financial Starter Kit
Congratulations! You did it! You have already graduated or you are counting down the days until you walk across the stage (or watch virtually) and I am so proud of you for all you have accomplished already. I may be a new face and voice to some of you so for a very quick background and intro my name is Kayla Cummins and I am a 2016 graduate from THE Winston-Salem State University. I am currently a travel nurse and money coach and I love helping others with their finances! I have paid off $77k in debt, funded multiple savings accounts, now self manage my investment portfolio and have grown my net worth to over $270K. I am working towards early retirement and I enjoy being here helping others do the same.
My college graduation in 2016. Shot by Garrett Garms.
I know the very last thing you would like to do as a new graduate is read a blog about finances, but I want to share a few things that I believe will be a great starting point for your financial journey as you enter the workforce. What I am sharing below is all from personal experience. I am not a financial advisor. I’m going to show you some of my mistakes and how you can avoid them in hopes of being in an even better financial situation when you too have been in the real world for 5 years!
Let’s get right to it.
DOs
EMPLOYER 401K
This is a part of your compensation package. As soon as you are eligible, enrolling in your employers 401K program is a must. Some companies match your contribution up to a certain percentage. It is best to invest at least enough to receive their match. Some say this is free money, and it kinda is, but it is really already included in your package so do not leave this money on the table by not investing your required percentage to receive it. If you are unsure of what to invest in within this retirement account you can always choose a target-date fund that will automatically rebalance based on years until retirement until you learn more about investing. The most important thing is to start early and remain consistent. Your contributions will be removed from your paycheck before you even get it so if you start right away you won’t miss this money, trust me!
EMERGENCY FUND
From your very first paycheck you should begin saving for your emergency fund. This savings account should hold 3-6 months worth of expenses should you ever be without a job or run into a true emergency. Establishing a budget immediately once you determine your new expenses will help you determine how much you can save each month. Check out my post “Budgeting. Part 1” for step by step instructions on how to create a budget.
FURNISHING YOUR NEW SPOT
If you have to move or get an apartment to start work and cannot return home I highly highly recommend purchasing your furniture second hand. Facebook marketplace has insane deals of normally very well taken care of gently used pieces that you can get for a steal! On facebook there are also groups called buy nothing groups. People literally give away items in these groups for free. You normally have to arrange pick up and that is all! If you are living in Charlotte, NC search “Charlotte buy nothing group” and several should pop right up. Avoiding brand new furniture for every room and corner will allow you to save so much money!
ROOMMATES
I know that this is going to be the hardest to do for some people. You have probably had roommates the entire time you have been in college and you’re so ready to walk around naked and live on your own. If you can tough it out for one more year and get a roommate for at least your first year after college you will thank yourself later. I was the college grad that had to live by herself. I had a one bedroom apartment across from a very busy outlet mall that in 2016 ran me about $1090 a month. I remember as a new nurse my bi weekly take home pay was around $1300/$1400. When I think back to how truly stupid of a decision this was I cringe. My mom tried to talk me into getting a cheaper apartment closer to my job in a lower cost of living city and I refused. I would not even have the conversation with her. I bought my first house after one year of apartment living, but had I lived in a cheaper apartment I would have been able to save more. When I bought my first home I EMPTIED my savings account because thats all I could save in such a short time with such high expenses. 10/10 do not recommend doing this!
BUILDING CREDIT
This is going to be the most controversial topic I am sure, but I 100% believe that you need to start building credit as soon as possible. Preferably while you are even still in college, but it is never too late. Credit cards are not bad. Poor spending habits and no accountability with credit cards are what get people in trouble. Having a credit card that you use for gas, groceries, and maybe a few bills but pay completely entirely off each month is totally okay. That is actually how you build your credit. You never want to carry a balance over into the next month as this is where you start to get into trouble with interest. The bank will charge you interest each month that the balance is not paid in full, but if you pay it off completely then you’re fine! I love using my credit card to gain rewards points and keep my credit score up. Again, many people will try and tell you to avoid them but I use mine weekly. You need credit to do almost anything these days. I have had jobs check my credit prior to approving me for a company credit card. Even small phone companies perform a credit check, and good luck buying a car or house without credit, it’s not going to happen. Start establishing this early, or start repairing it now if you already have made some mistakes with your credit. You can do this on your own as well, you do not need to pay someone to “fix” your credit. There are tons of free resources on YouTube with literal scripts of what to say when you call to negotiate collections and old accounts.
DON’Ts
SPENDING TO IMPRESS
Keeping up with the Joneses will keep you broke! I know graduating, working, and making real money for possibly the first time in your life can be overwhelming. You might see your friends taking trips, purchasing everything that I am advising you not to, and just living their best lives. I’m not here to tell you not to treat yourself for your success or buy things that make you happy, but buying or doing things to impress others will have a negative impact on your finances and overall will not contribute to your happiness. You are the only person in control of your finances and you are the only person responsible for creating your own happiness. I have learned that my happiness does not come from “stuff” or trying to impress others. I challenge you to find out early in life what brings you peace and happiness and leave all the “things” on the shelves that only provide temporary enjoyment and get tossed during your first move.
NEW CAR
I don’t know why we do this, but we ALL do it. If your car is safe to drive and is running give yourself at least 6 months to get established, save some money, and feel comfortable with your new expenses before running to the car dealership. I personally am huge on cars. I have always spent a lot of time driving to work, driving to see friends, driving home to see family etc. so I always have had nice cars because its just “what I wanted”. Had I drove my first paid off car until the wheels fell off I would have so much more money saved and would have owed less total debt when I started paying my debts off.
EXPENSIVE APARTMENT
We have touched on this already but I am adding it here under the do not do list to emphasize how important having low housing expenses really is. Say you wanted a $1100 one bedroom apartment but instead you went with a $1500 2 bedroom apartment and you got a roommate. That is an extra $350 a month. Let’s say you are 24. At the end of this year you invested $4200 ($350 x 12 months) and you did not add anything else to it, assuming a 8% return in 20 years you would have $19,576.02. Now you are 44 and you have basically $20K from a decision you made fresh out of college. This is the power of compound interest, all from having a roommate for one year. Again, I get sick when I think of how much money I threw away because I wanted to live alone immediately after college. Yes mom, you were right.
My new grad expensive apartment, with my brand new financed furniture that I again currently do not own.
If you have made it this far I want to thank you for giving me a few minutes of your time. I really hope this has been helpful and I hope you will really think about some of the things that I have talked about. I know this is not fun, and this is not anything you even want to think about right now. When you are set for retirement in just a few years because you have invested and have time on your side you will thank yourself. When you have an emergency fund established when one of life’s inconveniences happen (it will happen) you will thank yourself. When you aren’t stressing money going into your 30s and 40s because you made a few tough but smart decisions right out of college you will thank yourself!
Please share my posting or blog with your friends and establish a financial support system. My best friend and I run numbers, goals, and ideas by each other almost weekly. My boyfriend and I establish goals and plans to reach these goals all the time. Not talking about finances is a thing of the past, get comfortable with yours and find someone you can trust to discuss them with. I am always here for any questions and if I do not have the answer I have a lot of other financially fit friends that I bet will. Together we can all help each other be successful.
Thanks again for being here and congratulations on graduating!
Kayla
