Wallet Hacks

Essential Money Management Guide for New College Graduates

Congratulations New Graduate!

I remember when I first graduated from college. I was fortunate, in one of the worst job markets for software engineers following the dot com bubble burst, to have landed a job with a defense contractor in the Washington DC area.

I only knew one other person who would be moving to the same area, I was intimidated, I was going to be in the “real world” all by myself, and I didn't have the technology you have today with Facebook and the like to help me find folks to hang out with.

Fortunately, my company was hiring about a hundred+ new graduates each year and each “class” formed it's own little social circle.

I consider myself very lucky because many of those folks are my friends to this day – even though few of us work at that company more.

One thing I wasn't prepared for was the financial and career realities of post-academic life. In college, life was straightforward. Go to class, learn, take exams, write papers, get grades, and graduate.

Life in the real world isn't nearly as straightforward.

But it can be. While we won't be able to help you navigate any beef you might have with your boss, I can give you a lay of the land so you know the words to Google to find the answers you need. People have been graduating for years. They've been studying 401(k) plans and IRAs, credit cards and bank accounts; you can skip the noise and get the cheat sheet to help you get your financial life started on the right track.

Step 1. Build a Financial Foundation

Our guide to building a financial foundation is a soup to nuts list of all the things you'll need in a financial system (and why you need them).

Today, we're going to focus on the core essentials.

“Finances at a Glance” Documents
The documents give you a quick snapshot of your finances. When maintained, it can cut down how long you need to spend on your finances.

I keep three files for these snapshot documents – a Money Field Manual, a Net Worth Spreadsheet, and a Financial Network Map.

The Field Manual explains all of my financial accounts so that I don't have to remember them. My Net Worth Spreadsheet just tracks monthly balances, so I can see my financial progress in one place. Finally, the financial network map is a drawing of my accounts and how they're linked. These three documents capture my entire financial world onto paper so it's out of my head.

Bank Accounts
Next, you need to figure out where you'll be keeping your cash. I use two banks, a brick and mortar bank (Bank of America) and an online bank (Ally).

Nowadays, you can do almost everything with an online bank, except deposit cash (how often do you do that?). Online banks offer much better interest rates on all financial products (checking, savings, CDs) plus ATM reimbursement so you can use any ATM and not pay the fee.

If you have an account from college, check to see what it becomes when you graduate. Sometimes the product really suffers because of fees, sometimes it's great but you need to check and make sure you don't start paying for something you don't want.

Credit Cards
When used responsibly, credit cards offer rewards and perks unavailable with cash. It also helps build credit, useful for future financial decisions.

Find a credit card with a great sign up bonus and ongoing perks, then pay off your statement balance each month.

A Simple Budget System
A budget ensures you stay on track with income and expenses. If you aren't keeping track of your spending, it's way too easy to overspend.

Budgeting doesn't have to be difficult. If you want to keep it as easy as possible, follow a simple “pay yourself first” budget. With “pay yourself first,” you keep yourself in line by paying into your savings before you buy anything else.

By following our system, you will build a financial foundation that will be easy to understand, easy to maintain, and get you going with minimal wasted effort. I manage my finances in just 15 minutes a month because I keep things organized and simple.

Step 2. Jump Start Your Career

Your first job out of college is going to be a big massive hairy bundle of challenges.

Fortunately, these are all challenges with simple solutions if you've done it before. You haven't but other people have and our guide to Crushing It at Your First Job outlines it all.

The core focus of the guide is getting you set up in a new geographic area, like renting an apartment and getting your car registered in a new state, but continues into your First Week's Financial Decisions (like setting up your 401k, insurance, etc.).

It closes with a look at rebuilding your social network in a new place, which is crucial for emotional and social health.

Step 3. Paying Down Student Loans

Once you're settled, it's time to figure out a plan for your student loans.

1. Consolidate and refinance, if it makes financial sense. Consolidating your loans turns multiple monthly payments into a single monthly payment. Refinancing your loans means you can lower your interest rate. Work with a bank (or a company like SoFi) that offers student loan refinancing to find out what your options are. If you have a mix of low and high interest lows, you may only refinance and consolidate the higher interest loans – leaving the lower interest loans on their own.

When picking who to work with, compare the different perks at each bank too. When I refinanced my loans, I received interest rate breaks for autopayment and consecutive months of on-time payment.

2. Pay loans aggressively. Once you've consolidated and refinanced, start aggressively tackling the highest interest loans first. Like any debt, the key to paying it off faster is to… well, pay more. There are two schools of thought when it comes to debt repaying – do you pay off the smallest amount so the loan is paid off sooner (known as debt snowball) or do you pay off the highest interest rate so you pay less in interest? Whichever way you choose, paying more always wins.

3. Find a job that offers loan forgiveness. My sister graduated from Boston College with Stafford student loans but was offered student loan forgiveness if she was willing to work in South Boston as a teacher in a low income school. This page on the Federal Student Aid website explains it in greater detail (Google for your state too, there are some state and city specific programs too).

If you were fortunate to escape college without loans, perhaps you have credit card debt? If so, you'll want to read this inspiring guide for paying off massive credit card debt from my friend Chris Peach. He paid off a staggering $52,055.15 in credit card debt in less than a year — read his budgeting strategies and tactics plus get printable cheat sheets for making it all happen.

Step 4. Have Fun!

You just went through an academic grind, it's natural to want to celebrate a little so go out and have fun.

It's important that when you do have fun, don't overextend and don't commit to a big financial burden in the process.

If you want a fancy new car, lease it. If you want an awesome apartment in the city, rent it. If you want to go on a cruise or a European vacation, go. You're young, you can afford to have fun, and as long as you don't saddle yourself with a big burden afterwards (like a massive car payment or mortgage), you'll still be in good shape.

Leasing a car may not be the financially optimal choice but it's not always bad to treat yourself, to celebrate a big win, and live it up a little. Eventually, once you've scratched that itch (and when the car stops being as exciting), you can decide you want something more practical and you can just turn in the keys.

Renting an expensive apartment that's in the hottest neighborhood will cost more. But you get the fun of city life, being able to go out without having to get into your car, and when you're done you can buy someplace more practical for the long term.

You can have fun, just don't sign up for a 10-20 year burden that'll outlast the fun!

Finally, expand your social network too! If you're moving to a place where you no absolutely no one, start looking for meetup groups around hobbies you enjoy. If you are into sports, there are usually plenty of recreational leagues you can join as a single. Young professional groups and alumni groups are great ways to meet folks who are probably also new, or relatively new, to the area.

Congrats again and if you have any questions, hit me up!