Dave Berry offers advice for recent grads who are just starting to get the hang of keeping a budget. Share your budgeting tips below… https://www.collegeconfidential.com/articles/parents-your-college-grad-needs-financial-advice/
- Live beneath your means (always, regardless of your means). You don't need new luxury anything just because you got a nice job out of UG.
- If job has a matching 401k, contribute to the match level immediately as that is free money and will grow into an enormous sum 40 yrs later.
- Do not carry ANY credit card debt. Use cards for convenience, not actual credit. Pay them off 100% every monthy like clockwork.
- Systematically invest (even if it's just $50/month) in something outside of company retirement plan. Just get in the habit of investing vs. spending (you won't really miss the money if it's systematic)
Wealth creation doesn’t require tons of money. It requires human behavior and time. It really works.
I would also recommend that they contribute to a Roth IRA. They will have years of growth that will be nontaxable later.
The most recent advice I’ve offered my recent grad (and my freshman as well) is to be selective with whom they discuss their financial affairs. For today, I’ve suggested that we parents are the only ones to discuss finances with, until they either are in a financial relationship with someone or are working with a financial advisor.
Landlords (in whatever form they take) or roommates only need to know you will pay rent on time
Co-workers really don’t need to know about that extra income (overtime?) Or that you have an emergency fund. That fund is to cover your emergencies, not anyone else’s.
I’m still figuring this out as I go - while my parents were frugal, they did not talk with us about money or managing it.
Learn to cook. Learn to cook. Learn to cook.
When you are done with that, invest in a $20 coffeemaker and learn how to make coffee.
You are now ahead of your entire generation.
I am gobsmacked when I hear about the new grads who work at my company who eat out (or get delivery ) almost every night of the week; they show up every morning with a cup of purchased coffee (even though it’s free at work) and some of them seemingly don’t have two nickels by the time payday rolls around.
If you can learn how to make a few weekday meals, AND learn to make a “company meal” for when you want to entertain, the hundreds of dollars a month your colleagues are spending on food that someone else has prepared can go straight into a savings or investment vehicle. When they are trying to figure out “how come I’m always broke when I never buy anything?” you will be figuring out how to diversify your investment portfolio, while munching on a homemade Panini and drinking your own gourmet, ground by you, coffee.
just gotta say - so thankful for kid taking that State School scholarship! - no debt; making a good salary starting soon as an actuary – and has wad of money saved from internships. Frugal Frugal kid. It will be interesting to see his investment choices. And car choices. And real world choices. Some good ideas here.
I agree with “learn to cook” noted above. Also learn to enjoy entertaining at home with friends. Enjoying wine, a meal, games or a movie with friends in your home is a lot of fun and costs much less than going out.
Be careful who you choose to marry.
Here are a few that helped me:
- The best time to start your investing (if you can't do it initially) is when you get a raise. I made it a habit of investing half my raise since my first raise. I easily retired at 60 without it hurting too much along the way.
- Get a basic understanding early of stocks, bonds and short term investing.
- Always pay credit card bills in full every month. If you can't, you shouldn't buy it. Pay in cash if you have problems with this so you understand the value of money.
- Buy a book by Marie Kondo and give it to your child. Share the value of living simply and buying only things that "spark joy". Try to share the amount of money you have spent over the years that you didn't use much into real dollars. Collect things you don't need and allow your student to keep what they sell online.
- Be a good role model. Try to be an example for the person you want your child to be, and that goes with how you spend money.
All good advice. I don’t know what the rates are on student debt, but if the rates are not subsidized, paying down student debt quickly is a really good idea.
I’d add that the biggest financial risks that a young person faces are probably medical (including psychiatric problems) and divorce.
Get good health insurance if you can. If a kid has a SO who works for a big company that has better health insurance, in some states one can go on the SO’s policy.
Advice on the latter problem is probably much more situation-specific, but would involve some kind of third party trust for pre-marital assets or a pre-nup and possibly investments made from a Roth IRA.
Shawbridge, I don’t know what circles you run in, but the young people (20’s and early 30’s) who are divorcing that I know don’t have premarital assets- they have debt, lots of it, and that turns their “easy peasy” divorce (no assets, no kids, nothing owned jointly except the toaster oven and the wedding presents) into a nightmare.
College loans, grad loans, and then on top of it, all the credit cards and the car loans (two of them, because what self-respecting young person living a life they cannot possibly afford would take the bus?)
What a luxury to have a prenup and a trust!
You’ve graduated. What you’re now embarked on is a career. A career is not likely to be just one job. It will be a series of them, interrupted at times by periods of unemployment (or by your going back to college for another degree). I’ve only had two employers in my long career after receiving my advanced degree. But most people have many more employers than that.
One of the reasons to save money is to cushion you for job interruptions. Another is to build a retirement fund. Retirement may seem far off, and it usually is; but steady saving will get you there. How much? Minimum of 10% of your gross income/salary, preferably 15%, invested in 401k’s, IRA’s and other tax-deferred investing plans.
@blossom, some kids are starting up companies that might be worth something. It happens. That is what I had in mind. No reason for snark. Maybe I should have qualified my suggestion.
I recently co-founded a company with a late 20s female (MBA/CS Masters) CEO in the job/compensation space (which I think is related to what you do, if I’m not mistaken). We are closing what will be pre-seed round and turned down a much bigger investment. As CEO, she has a significant shareholding. which would be a premarital asset. I do know a bunch of kids that are involved in tech startups, including my son. Some are founders. Some are early employees. Most will have shares in their companies as a pre-marital asset. Only time will tell as to whether these assets have value.
Also, the divorce need not take place in the 20s or early 30s even if the marriage does. But, I take your point that this is a small percentage of the folks out there.
I do know families where kids potentially have pre-marital assets but I doubt much has been passed down yet. That is rarified territory, I know. But, those aren’t the folks I had in mind.
Interestingly, vis-a-vis car loans, a number of the kids I was thinking of in the South Bay/San Francisco that I know don’t have cars – they take CalTrain or some employer bus to work and use Uber/Lyft/ZipCar if they need a car. But, that may not work elsewhere.
I wasn’t being snarky AT ALL and I apologize if it sounded that way (drat, the internet…) I would have given the exact advice you are giving if it was to someone in their 40’s or 50’s, since I know a lot of folks whose divorces become incredibly stressful and expensive because they have given zero thought to how to title their assets as they accumulate.
Agree with you on the car situation. I am shocked by the number of young folks living in great transit-rich areas who still insist on owning a private vehicle. They pay to park and insure the car even when they take public transit to work, and uber home after a night out. I know someone living in midtown Manhattan who parks his car in a garage in NJ; it gets used once a month? To him, owning a car means being an adult.
Crazy, right?
Apologies if I came off as condescending… agree that folks in the start-up ecosystem (not just the founders) need to be mindful of who owns what/who retains what.
Mine all need cars except for one. Need because poor use of too much time on mass transit that also needs a cab or Uber link. At this point , fed up with unreliable cars.
By learning to cook, I’m of the school of that meaning how to put together a quick, inexpensive ,nutritious, delicious meal. Too many folks eating out these days. The thought of where and what that money is leading to, is disheartening and disgusting.
However, the potential asset-rich 20-somethings are probably only a tiny percentage of the total. In general, today’s 20-somethings are poorer than their parents were at the same age, due to greater education debt and a more competitive job market for good jobs.
@cptofthehouse, my kids follow our lead-- we shop at Costco and cook at home most of the time – but we also go out for relatively expensive meals. I think ShawD at least had gotten a taste for this. In her group, they are really into cocktails, which would have been way too expensive for me. Maybe a roasted piece of advice: Stay away from drinking at restaurants.
I think many of today’s 20 somethings missed the message on “everything in moderation”. So if they get home from work too tired to cook because their team is pushing on a deadline- they order delivery. Terrific. Better than going hungry. But that becomes a habit- so it’s delivery EVERY night, and after two months they are shocked to see their credit card bill. Or the team leader takes them out to a cool new restaurant to celebrate after the deadline is met, and they eat something special and fabulous- that becomes the benchmark. Why make pasta at home and invite your friends over for beer and spaghetti when you can get a reservation at the special and fabulous place? And then they see that one meal at “special and fabulous” is their entire recreation budget for the month- but since they don’t believe in budgets, that goes out the window as well.
I have young men and women working for me who are proud that they never learned to iron. I’m not sure this is as liberating as it feels to them, since they routinely spend more on dry-cleaning in a month than I spend in a year (yes, my parents taught me to iron). It takes less than four minutes to iron a top/shirt/blouse so it’s work appropriate; it “only” costs $5 or $6 to have it dry-cleaned, or $3 for a shirt laundered. That’s a lot of “only’s” unless you work in a place where wearing a ratty Grateful Dead T-shirt is considered office attire. This is the generation that loves to ferment their own kimchi and bake their own sour-dough bread, but the daily tasks of living and running a household (whether for one person or multiples) seems beyond them.
Giving your kids some practical skills (save time AND money!) will help them down the road!
My daughter is newly affluent but her frugal roots are hard to shake. She and her boyfriend like to cook and are thinking of cooking lessons for fun. She takes her lunch twice a week, goes home for lunch twice a week (to let the dog out; her boyfriend does the other two days) and gets off at noon on Fridays and I think she eats out sometimes and just goes home other times. I think that’s a pretty good balance.
She’s had about 9 months to get used to this budget and it does take some time to get used to budgeting and paying rent and car payments and student loans, but it is time for her to start saving more in the 401k. She won’t listen to me. Someone else will tell her and then she’ll do it. Her employer starts contributing to the fund (no matching, just an 8% contribution) this August and I think she’ll see how quickly it grows and start putting more into her account.
One of their biggest expenses is weddings. They have each been invited to and been in weddings. There is the gift, but also the travel, the clothing, the hotels, the bachelor/bachelorette weekends. Honestly, ridiculous amounts of money.
Her boyfriend likes expensive orange juice but D doesn’t think it is worth it so he has to buy his own. Oh, the compromises of young love.
@twoinanddone You bring up another large expense in weddings. I agree with what everyone is saying about cooking at home, bringing lunch, not getting the pricey coffees. Weddings cost the people who are in them way too much. Overall weddings cost way too much. It is a waste of money.
Debt on anything other than a car or house is bad debt. Even the car debt should be a sensible car.
I just wish my D19 would find stuff to do that didn’t include going out for food with friends. My friends while in HS never had dinner money. Dinner was at home and we did something afterward.
The foot delivery thing is just something I can’t wrap my hands around. That is just laziness. Only in a very few circumstances should food ever be delivered.