12 Smart Money Moves for College Grads: A Guide to Success in 2022

Written by Jordan BlansitReviewed by Nathan Brown, CFP®Updated: 13th Sep 2022
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Graduating from college is a crucial step on the path to adulthood. Not only do you lose all the perks of being a student (goodbye, movie discounts), but now you have to take responsibility for your life and career (hello, student loans and job hunting).

The sudden changes that follow post-grad life can be challenging to navigate for the unprepared. That’s especially true when you’re juggling finances, your career, and potentially a topsy-turvy housing market.

Fortunately, with a bit of discipline and financial know-how, you can steer yourself toward the path to long-term success. To help you along, we’ve gathered 12 smart money moves to make as a new college grad and fresh young adult ready to take on the adventure of life.

Smart Money Moves for College Graduates to Make Right Now

#1. Prioritize Your Money Goals

Money isn’t everything in this world – but it sure makes enjoying life a lot easier. Whether you want to buy a house, start a family, travel the world, or even launch your own business, you need capital to make it happen.

So instead of letting your finances sort themselves out, start by writing down your short- and long-term financial goals. Setting your desires in stone, so to speak, helps you build a budget and keep your end game in mind.

#2. Create a Realistic Budget

Yes, budgeting is boring. But it’s also necessary. A comprehensive financial budget provides the foundation for the rest of your financial life and makes it easier to stay on track to meet your long-term goals. And ironically, boxing your dollars into a budget can lead to more financial freedom, as you’re able to confidently make purchases and plan ahead.

One crucial component of budget-building is to base your spending and saving off your net income, or your take-home after taxes and deductions. Elsewise, you overextend your budget and allocate dollars you don’t have to goals you’ll now fall short on.

Once you figure your take-home, there are a couple of approaches you may take. The first is the 50/30/20 budgetor a variation thereof, which allocates:

  • 50% of your income to essentials like rent, groceries, and debt payments
  • 30% of your income to wants, such as entertainment
  • 20% of your income to saving and extra debt payments

But if you’re living paycheck-to-paycheck, you may not get the luxury of deciding where your dollars should go. If that’s the case, start by working your budget backwards and determining where your money already goes. Then, decide if you can eliminate or shuffle around expenses to meet your needs and free up more income. After that, you can start working toward a budget that includes saving and the occasional day out.

>> More: How to Budget Money

#3. Avoid the Temptation of Lifestyle Creep

Once you graduate college, you may be able to use your degree to leverage yourself into higher-paying positions. But just because you’re bringing home more bacon doesn’t mean you should increase your spending needlessly.

Lifestyle creep occurs when your expenses and income rise together. Some of this is natural – for instance, if you go from living in poverty to having some disposable income, we won’t begrudge you buying a nicer house or going out to eat occasionally.

But often, lifestyle creep balloons your expenses beyond basic needs and wants, such as buying an expensive car or going on vacation three times a year. Remember: the key to financial success is living below your means. Saving what you can afford while maximizing your quality of life will allow you to enjoy the here, now, and later.

#4. Begin Building an Emergency Fund

An essential part of “adulting” is preparing for the worst. One of the best ways to ensure that your financial plans don’t go astray is to save at least 3-6 months’ worth of expenses in a high-yield savings account. Earmarking this fund for emergencies only ensures that you can cover your butt in the event of a sudden job loss or medical event.

But don’t let that savings goal scare you – no one expects you to save 3-6 months’ worth of expenses overnight. Starting slow with $5 a week is better than absolutely nothing, and $500 set aside can offset or eliminate the need to take on debt should an emergency arise.

#5. Set Up a Retirement Plan

Early in your career, retirement seems like eons away – and for many, it is. But the truth is, there’s no better time to get into the habit of saving for retirement. The earlier you save, the longer your money can grow, and the easier it will be to stick with your savings plan.

Fortunately, saving for retirement is easier than you might think. Many employers offer 401(k) retirement accounts to start contributing to your future. Some even boast matching contributions – up to a percentage of your income – to accelerate your saving power.

If your job doesn’t offer a 401(k), or if you want to set aside a little extra, you may consider an Individual Retirement Account (IRA). Like 401(k)s, these accounts come with unique tax advantages to encourage saving and protect your dollars. Using either or both of these accounts can even lower your lifetime tax bill if you leverage them correctly.

#6. Start Investing ASAP

But don’t let your retirement accounts have all the fun. You can also open a taxable brokerage account to start investing on the side. While taxable accounts don’t come with the same tax advantages, they also don’t have all the withdrawal rules and penalties that retirement accounts do. Plus, by investing early and often, you can give your future an extra leg up thanks to the effects of time and compound interest.

After you’ve stockpiled a few hundred in your emergency savings account, consider setting up an investment account with a brokerage or robo-advisor.

Generally, experts recommend starting slow, such as purchasing low-cost index funds, ETFs, or mutual funds to introduce automatic diversification into your portfolio. While not exactly exciting, you’ll rack up fewer fees (and generally smaller losses) than trading individual securities.

>> More: How to Start Investing

#7. Assess Your Student Loans

Around 55% of Americans under 30 have taken on debt to finance their education. Unfortunately, between the hustle and bustle of college life and the complicated web of private and federal funding, knowing how much you owe to whom can get confusing.

Now that you’re out of college is the time to assess your loans and gain a clear understanding of your finances. Start by reaching out to your private lenders, your school’s financial aid office, or the National Student Loan Database (NSLD) to confirm your obligations.

Additionally, if you have federal student loans, you’re entitled to a six-month grace period before your repayment schedule kicks in. (Some private lenders offer this too, though they’re not required to.) You can use this time to make payments or plan ahead to fit them into your future budget. And if you need further deferment, a forbearance period, or an income-driven repayment schedule, now’s the time to apply.

#8. Start Paying Off Your Debts

When you make your budget, it’s important to factor in your current or future student loan payments as a necessary expense. Now that you have your information at hand and some emergency cash stashed away, it’s time to pay up.

But you don’t want to shed your student loan debt only; getting rid of any debts, especially high-interest loans, is essential in your early years. That goes for credit cards, personal loans, and other obligations that charge a higher-than-average interest rate. The quicker you repay these debts, the less interest you’ll pay, and the sooner you’ll free up your income.

And remember making more than the minimum payment whenever possible can save thousands over the life of your loan.

#9. Get a Credit Card to Start Building Credit – Responsibly

If you don’t already have debts in your name, then we’re going to take a different tack and recommend you change that – carefully. While going into debt and paying interest isn’t in your best interest, building credit is. After all, you need credit to buy a house, get a credit card, and sometimes even to get a job.

But that doesn’t mean you shouldn’t be responsible. Start by taking out a secured or low-limit credit card. You can use that card only for essential or recurring expenses, such as your utility bill or fuel fill-ups. Then, pay off your entire bill the day the charges post or at the end of every month. This gives you the opportunity to build credit without “really” going into debt.

#10. Consider a Sinking Fund

Life isn’t just about covering bills and emergencies – it’s also about planning for the future. Whether you want to buy a new car, replace your old laptop, or plan for your annual insurance premiums, a sinking fund can help you achieve your goals.

A sinking fund is essentially a savings account that you make small, regular contributions to so you can spread out the cost of upcoming expenses. For instance, you may start putting $50 a month toward your insurance premiums or keep “paying” your auto bill after you’ve paid your loan off to build up a down payment toward the next.

Generally, it’s wise to set these funds in a separate savings account so you don’t spend them. But if you don’t, you should keep a running tally of how much your savings are meant for your future goals.

#11. Make Your Money Work for You, Not Against You

There are several ways to make your money work for you – or prevent it working against you.

Perhaps one of the most obvious is by investing regularly. Putting money into your portfolio gives you a chance to leverage compound interest and the price appreciation that comes with owning securities.

Debts are another fantastic example. Instead of letting your interest payments line a fat cat’s pocket, start paying off your debts as quickly as possible to shave extra off your bill.

Another way to capitalize on your capital is by leveraging your debts. For instance, rewards credit cards often give mileage points, cash back, or discounts for making regular purchases. While you’re still spending money, you’re also saving or bulking up rewards for future expenses.

Anytime you can make a financial move that puts more money in your pocket (or less in someone else’s), you’re leveraging your money in your favor.

#12. Establish Yourself Professionally. Work Hard.

We’re shifting gears away from financial advice into career advice (though the two often travel glove-in-glove). As you move into your new career, make an effort to establish yourself not just in your role but in your field. No matter the job, from professional chef to rocket scientist, you can always take steps to stand out and get noticed by those with the power to elevate your life.

Of course, we’re not advocating to let your bosses take advantage of you – merely to know your worth and do your work to the best of your ability.

5 Tips and Tricks for Success: Start Now, Not Tomorrow.

#1. Think Long-Term

Life is short – sort of. Realistically, you can expect to live at least 40-50 years after college, assuming you graduate in your mid-20s. That’s a lot of time to work and prepare for what life throws at you.

Whenever you make money decisions, consider the long-term impacts of your actions. Sure, buying a $5 latte every day seems harmless, but that’s $150 a month you could add to your savings. Cutting back to just 1-2 a week can save literally hundreds every year.

This principle also extends to much larger, more impactful decisions, too. For instance, when you buy a house, consider what it would mean to move in a few years. Could you sell the house for a profit? Rent it as passive income? Or would it be a money sink that would weigh down your future finances?

From where you live to how you navigate your career, consider every decision through a long-term lens. You have your whole life ahead of you – so set yourself up for success every step of the way.

#2. Read Books. Listen to Podcasts.

Knowledge is power. Whether that’s the power to reevaluate your life, tackle new challenges, or advance your career is up to you. But if you want to gain that power, you’ll need to take in new information, consider new viewpoints, and examine your life and the landscape around you. Picking a good book or podcast for your commute can build your mental fortitude and open your eyes to new concepts and realities.

Remember: college gave you the skills you need to learn and think critically about your life path. But if you don’t exercise that power after graduation, have you really gained anything at all?

#3. Consider Downloading a Budgeting App

Budgeting doesn’t have to be difficult in the modern age, thanks to the advent of apps that handle your finances for you. If you struggle to create or stick with a budget, downloading a budgeting app can help you get started, stay on track, and reach your goals faster than you thought possible.

#4. Set Realistic Goals

Reaching for the stars can help you achieve great things, but you risk overshooting if your feet aren’t grounded in reality.

Translation: one of the easiest ways to get discouraged from your goals is to set unrealistic expectations and fail to meet them. Instead, when you’re just starting out, think simple and small. Save $5 a week. Earn an extra $100 a month from your side hustle. Aim to set aside $500 in your emergency fund this year.

As you reach your goals, you’ll build good habits and gain confidence in your abilities. And as your goals become achievements and your career grows, don’t be afraid to set new, slightly higher goals to push yourself even further.

#5. Be Honest with Yourself

The road to success is beset by trials and tribulations. If you’re not honest with yourself about what you can reasonably accomplish in a certain time, overcoming them may be impossible. Consider what you want, where you are, and why you’re struggling. Remember what Bill Gates said: “Most people overestimate what they can achieve in a year and underestimate what they can achieve in ten years.” An honest accounting of yourself, your goals, and timeframes will smooth your path and avoid many disappointments.

What is the Best Thing for a College Graduate to Do Financially?

Paying down debts and investing early is certainly high on this list. While achieving “adulting” milestones like buying a house and car are noble enough, securing your future by ensuring your income is yours makes achieving your future goals much, much easier.

Why Do New College Graduates Struggle to Save Money?

According to the Pew Research Center, 52% of Americans between 18 and 29 still live at home (or moved back in during the pandemic). And yet, most of those still struggle to pay bills or save enough to move out. Why?

A report from the AARP suggests that one primary reason is the rapidly rising cost of college attendance. Consider that in the mid-1960s, the annual cost of attendance at a public four-year university was $7,256 per year (after inflation). But today’s incoming students face an average cost of $19,000 per year at public schools, despite average incomes not rising at the same rate.

That means that students have to take out much more debt to attend school while also earning less once they graduate. Together, these factors pose a major obstacle to saving or establishing financial security.

Should I Work Two Jobs?

Working two jobs can give you the extra income needed to pay your bills, shed debt faster, or achieve your goals on an accelerated timetable. You can also use the time to learn new skills or engage in career-centric networking opportunities.

However, working two jobs doesn’t always solve your financial problems, especially if you’re in a low-wage role or career. Additionally, having a second job eats up your free time and may lead to physical or mental exhaustion if you never get a break.

All that to say: for some people, working a second job cold be a necessity, for others a lucrative way to spend time. But if having two bosses or spending twice as much time at the grind negatively impacts your life, the downsides may outweigh the benefits.

Bottom Line: Smart Money Moves for College Graduates

Graduating from college is the perfect time to evaluate your finances, seek out new prospects, and prepare yourself for the future. While looking too far ahead may seem like a waste of time, future you will thank you for your maturity and foresight.

Jordan Blansit
Jordan Blansit

Jordan Blansit is a Senior Writer, Researcher, & Product Analyst for SimpleMoneyLyfe with an inexplicable predilection for mortgages, investing, and personal finance. When she’s not click-clacketing from the comfort of her living room, you can find her in the California Redwoods or Oregon Siskiyous. Jordan’s areas of expertise are mortgages, personal loans, credit cards, and investing.