11 Smart Money Moves for Recent College Grads Trying to Figure Out Adulting

Reviewed by Molly Moorhead, CFP®
A man pops his head out of a curtain to reveal he's a college graduate with a smile on his face.
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College graduation marks the beginning of what adulting truly looks like. Bye bye, student discounts. Hello, full-priced everything.

You had guidance from professors, support from your parents and the camaraderie of your fellow students in school. Now you’re on your own, and it may feel overwhelming to navigate post-grad life — especially managing your finances and dealing with the economic shakeup of the pandemic.

Don’t stress. We’ve got you.

11 Smart Money Moves for Recent College Grads

Here’s the practical advice we wish someone had shared with us when we were fresh out of school.

1. Don’t Succumb to Lifestyle Inflation.

Hopefully you’re earning more money than you did in school. Congrats! But use that salary increase for good, not for financial destruction.

Don’t give into the desire to buy all the things just because you’re making more money. Chances are you also have more bills. And now’s a perfect time to get in the habit of saving money for the future (but we’ll get more into that later).

As you settle into your life post-college, give yourself time to adjust. Don’t go out and purchase an apartment’s worth of new furniture all at once.

The key is to live within your means — or even below your means in order to build a nice cushion of savings. It might take time to figure out what that looks like. If you fail one budgeting method, give another a try. This isn’t a graded exam.

2. Treat Bill Due Dates Like Assignment Deadlines.

Gone are the days where you’d use loans or scholarship money to pay four months of room and board in full at the beginning of each semester. Now you’ve got multiple bills in one month, each to a different service provider.

Keeping track of when each bill is due is vital. Automating the process — either by using your bank’s auto-pay service or opting into auto-pay with your utility company or cell phone provider  — can be very helpful. If you want to be more conscious of what’s going out of your checking account, set up calendar alerts to remind you of each bill’s due date and make the payment manually.

Pro Tip

Set up one calendar alert a couple days before the due date for advanced warning and another alert the day the bill is due as a backup reminder in case you forgot to pay.

Make sure to factor in when you get paid. If your employer pays you weekly, biweekly or semi-monthly, budgeting the money you receive from each paycheck may be more useful than a monthly budget.

3. Get Used to Making Student Loans Payments.

If you borrowed money for college, it’s time to pay up.

Your loan provider will likely give you a six-month grace period before you have to start paying back your student loans. This gives you time to plan how you’ll tackle the repayment, but if you want to start paying your student loans back immediately, that’s even better.

When you’re setting up your post-grad budget, make sure you’re factoring your student loan payment as a necessary expense. Check with your loan provider to see how much your minimum payments will be. If the amount seems unmanageable, you might be able to get on an income-based repayment plan. You might also consider consolidating or refinancing your loans under a lower interest rate.

Pro Tip

You could get your loans paid off if your job has a student loan repayment program or through the Public Service Loan Forgiveness Program if you work in the public sector. Check if you’re eligible.

If you have trouble finding a job or otherwise fall into hardship, a loan deferment or forbearance will temporarily pause repaying your student loan. Typically, interest on the loan still might accrue during that period and you’d be left with more to pay back. Deferment or forbearance is usually only recommended as a last resort.

Due to the pandemic, however, the government has issued an interest-free forbearance on all federal student loans through Sept. 30, 2021. If you have private loans, contact your provider to see what options may be available to you.

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4. Use Credit Cards Responsibly.

Credit cards can be tricky. On one hand, they can help you build a positive credit score or earn rewards points. But use them irresponsibly and you can wind up in a hole of debt.

A wise practice is to charge only what you know you can afford and pay your balance in full each month. You may want to start off with a secured credit card where you put down a deposit that serves your line of credit.

If you are paying off credit card debt, keep in mind those minimum payment amounts are not your friend. They’re the lowest you have to pay each month if you don’t want creditors hounding you, but they won’t get you out of the hole any time soon.

Paying extra toward your debt, even if it’s just $20 more, can significantly reduce how much you’ll pay in interest. If you actually read through your credit card statements, you should see a “minimum payment warning” section that explains how making only the minimum payment will raise your total debt and prolong the time it takes to pay it off.

This premise of paying more than the minimum is true for paying off student loans, car loans or even your mortgage.

5. Have a Plan If You’re Moving Back Home.

These days, there really isn’t any shame in moving back home after college. What you’ll regret, however, is moving back home without a plan.

If you revert back to your high school days when Mom and Dad shouldered all the financial responsibility of day-to-day life, you could be setting yourself up for a more challenging transition when you do finally leave the nest.

Discuss with your parents the expectations for covering household bills and expenses. If they insist on you not paying any rent, put aside what you would have paid to save up for your own place or build your emergency fund. Speaking of which …

6. You Need to Have an Emergency Fund.

No one likes to prepare for the worst, but having money saved up in the event of an emergency is a crucial part of being financially secure.

Experts say you should have between three to six months of expenses saved in an emergency fund. Those who watched their savings dry up during the pandemic may want to save even more. But even just $1,000 could be a lifesaver if your car breaks down or you need to fly out of town to attend a funeral.

You can automate your savings by directing a percentage of your paycheck to a savings account. Or use an app like Digit to save money without thinking. Digit’s algorithm analyzes your income and spending and determines safe amounts to transfer automatically to savings.

Even if you just stash $5 bills in a jar, start saving for emergencies now.

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7. Create Sinking Funds to Save Up for the Big Stuff.

A sinking fund is a pool of money you regularly add to over time to make a large expense more manageable.

Don’t just limit saving to your emergency fund. When you’re ready to upgrade to a new laptop or you’re hit with your annual car insurance bill, you’re going to wish you had saved up for them gradually.

Setting up sinking funds for those infrequent expenses will prevent you from scrambling. You may want to open separate savings accounts for your different short-term savings goals. If you’re saving all your money in one account, record how much you’re contributing and what the running balance is for each goal.

8. Save for Retirement Now.

I know you’re just beginning your career. Retirement is probably one of the last things on your mind. But the earlier you start saving for retirement, the better off you’ll be.

Thanks to the power of compound interest, a 22-year old who saves $200 a month at a growth rate of 6% will have $371,428.72 by age 62. In comparison, someone who starts making those same retirement contributions at age 32 would have only $189,739.65 by age 62. That 32-year-old would have to be saving nearly $400 a month to have over $370,000 by age 62.

That’s a significant difference. Start now.

Opt into your job’s 401(k) plan as soon as you’re able. At the very least, you should contribute enough to meet your employer’s match.

If your job doesn’t offer a 401(k) plan, you can open an Individual Retirement Account or IRA. Even if you have a 401(k), you can open an IRA for additional savings. Check out this retirement saving guide for more insights to how you can save up for your future.

9. Avoid Being Underpaid.

Budgeting puts the focus on how much money you spend and how much you save. But the amount of money you make matters just as much.

Though your salary is likely to grow throughout your career, how much you make early on can have significant weight on your lifetime earnings. It’s for that reason states like California, New Jersey and a handful of others have outlawed employers asking about salary history on job applications. If you start off making less than others at your level in your field, you’re at risk of earning less in subsequent jobs.

This is why it’s important to make sure you’re being offered a fair, competitive salary from the beginning. Sites like Glassdoor and Payscale provide salary estimates for different fields and companies so you won’t accept a low-ball offer.

Pro Tip

Embrace the art of salary negotiation and counter-offer with confidence, even if the thought of it makes you sweat. Read up on how to negotiate your salary like a boss before your next interview.

When considering job offers, don’t forget to factor in the company’s benefits package and any other perks. It might be worth it for you to accept a position that pays a bit less but covers health insurance premiums, offers a generous 401(k) match and allows you to work remotely, lowering your transportation costs.

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10. Base Your Budget Off Your Take-Home Pay.

Speaking of salaries, know that the salary offer you agree to won’t be the amount of money you take home. That’s your gross income. Base how much you can spend and save off your net income, which is what you have after deductions are taken out.

It’s common to see the following deducted from your paycheck:

  1. Taxes (federal, state and/or city)

  2. Medicare and Social Security (which might show up as FICA on your check)

  3. 401(k) contributions

  4. Premiums for health benefits

  5. Short/Long-term disability insurance

  6. Life insurance

If you haven’t received your first check yet, ADP has an awesome paycheck calculator that estimates your take-home pay after taxes and other deductions are taken out.

Some deductions — taxes, Medicare and Social Security — aren’t optional. You’ll have a choice to make when it comes to others, like retirement contributions and various insurance plans.

If you’re under 26, you can stay on your parents’ health insurance plan. But you may choose to opt into your own plan if you don’t live near your parents and all doctors in your area are out-of-network.

The value in having disability insurance is that you’d be able to receive a portion of your income in the event that you weren’t able to work. This could cover short-term absences from work, like recovering from childbirth, or long-term absences, such as a serious injury.

If you’re wondering whether you’d benefit from having a life insurance policy, this article can help shed some light.

11. Get a Side Hustle.

You don’t have to resign yourself to working 24/7, but there’s a lot to be said for picking up a side hustle when you’re still young and have ample time and energy.

Pro Tip

Find ways to monetize your interests and talents. For example, sell homemade cakes for special occasions if you love to bake. Check out this list of 25 top side hustles.

You can use the extra income to pay down student loans or other debt. Or you could put it toward building that emergency fund or saving up to go on nice vacations. Having a side gig also gives you income to lean on if you ever find yourself out of a job, like if your company downsizes.

Another advantage of having a side hustle is you could develop skills and make connections to help you leverage a promotion or a better-paying job.

Feeling overwhelmed? Create a budget that works for you with our budgeting bootcamp!

Nicole Dow is a senior writer at The Penny Hoarder. Ten years after graduating college, she’s trying to make up for bad money decisions — namely maxing out her credit cards and not getting an earlier start on retirement savings.