5 Things You Need To Do With Your Money Once You Graduate From College

by Jessica Moorhouse

My sister just graduated from university. After five years of essays, presentations and exams, she finally got to throw her cap into the air and hang her degree on her bedroom wall.

But now what? Where's the guidebook that tells her what to do now that she's done with school and ready to take on the "real world?" And what's all this nonsense about budgeting and saving for retirement?

When I was her age — like so many other postgrads — I was unemployed, broke and in debt. I was desperate to figure out how not to fuck up being an adult, and I really didn't want to end up another overeducated and underpaid Starbucks barista.

With the fear or failure as my driving force, I got really nerdy and started reading every blog and book on personal finance.

After a few months, I realized that when it came to being a money-smart adult who didn't live paycheck to paycheck, there were five main things to do right off the bat:

1. Figure out how much it'll cost to move out.

Do you know how much cash you'll need on hand before you move out of your parents' basement or that dorm room your college fund paid for?

I had no idea when I first moved out, which was why I only had a few hundred bucks in the bank. I had a job lined up so I thought I'd be fine, but I was lucky.

I could have been let go after my three-month probation period. I could have hated my job and quit after a week. And if either of those scenarios happened, I would have been royally screwed.

So, here's how to avoid getting into a financial bind even before you start packing up all your stuff.

It's a very simple equation, really:

Have enough for first month's rent, first month's utilities, a rental deposit, transportation, food, entertainment, clothes, furniture, housewares and an emergency fund.

That wasn't so bad, now was it? And if you need to figure out exactly what you'll need for your first place, check out my free moving out checklist.

2. Make a budget ASAP.

To get a firm handle on your finances right out the gate, you need to make a budget. It sounds boring and maybe even painful, but it'll set you apart from all your peers who somehow make more than you, but are constantly complaining about being broke.

You can get started with my budget spreadsheet, or just open up Excel and start writing things down. Although making a budget is an important step in figuring out where your money is going and what your financial goals are, there are also a few key principles to keep in the back of your mind.

Pay Yourself First

It's one of the first lessons in any beginner's personal finance book, and that's because it works. What this means is, you shouldn't just save whatever money is left over after paying rent and bills. Instead, decide how much money you want to save, then whatever's left is how much you should be spending on rent and bills.

If you want to save 50 percent of your income and there's no way to do that while living in a one-bedroom apartment in the city, then it might be worth getting a roommate or moving a little further away to save on rent.

The Latte Factor

If you buy a $5 latte every day, you'll end up spending $1,825 on lattes in a year, which is stupid. That's a legit all-inclusive Mexican vacation.

So, get into the habit of keeping all your receipts and tracking your spending. Eventually, you'll see a spending pattern that'll reveal what daily indulgence you need to cut out of your life so you can start saving more money.

Start Saving for Retirement Now

Gone are the days when you could get a job with a pension like your parents. If you don't want to retire into poverty at age 65, then you better start saving for retirement now. You may only be 22 and think this sounds ridiculous, but there's a little thing called compound interest that will beg to differ. The sooner you start saving and investing your money, the bigger that amount will grow into when you're ready to cash out and retire in style.

3. Don't stop living like a student.

I remember when I got my first real job after graduation. I thought making a salary and living on my own meant I could finally stop living like a poor student. I was wrong.

Sure, I could have kept up with my friends and spent all my money on eating out, buying new clothes and going to concerts every weekend. But, I knew that as much fun as it would be to spend my money freely, it wouldn't help me get to where I wanted to go.

After paying off my student loan less than a year after graduation, I vowed to myself I would never get into debt again. I hated the feeling of owing money, and I wanted to make sure that if I needed to buy something down the road, I'd have the cash to do it.

This meant I had to live like a student a bit longer. Well, more like three to four years longer. But honestly, I wasn't less happy because of it. I didn't miss out on much. I was just a bit more creative when it came to finding ways to have fun.

Instead of going to the bar and spending $50 on drinks, I'd invite friends over and spend $10 on a bottle of wine. Instead of spending money on checking out the latest film festival, I volunteered so I could get a free pass. Instead of spending money on lunch during the week, I was vigilant in bringing my homemade lunch to work every day.

Not only did this help me stay out of debt, but it also helped me rapidly grow my net worth. Honestly, if I hadn't lived so frugally all those years, there's no way I could have paid cash for my three-week trip to Thailand or my move across the country to get a higher-paying job.

4. Don't quit that part-time job.

When I was job hunting after graduation, I got a side gig as a teleprompter operator for the news. It paid $20 and hour, which was way more than I was making at my full-time job. That's why I kept that side gig for over three years, helping me save more money than I could have had I just worked one job.

It may not sound like the fun thing to do in your 20s, but now that I'm in my 30s, I'm telling you to work as hard and as often as you can while you're young.

It's not easy juggling two jobs at the start, but it'll absolutely help you save more and live better later on.

5. Save and pay off debt at the same time.

When you have a boatload of debt to pay off, but you also want to be smart and start saving money, what do you do? Do both.

When it comes to paying off debt, focus on getting rid of the debt with the highest interest rate first. If you owe $500 on your credit card costing you 19.99 percent, but you also have a $10,000 student loan costing you 5 percent, pay off that credit card first. Once it's paid off, focus on crushing your student debt next.

But, paying off debt aggressively doesn't mean you should be putting all your income after bills into debt repayment. To avoid getting into further debt if an unexpected expense comes up, square away a percentage of your income into an emergency fund. If something happens and you need $1,000 right away, you'll have the cash to deal with it and won't have to put it on that credit card you just paid off.

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