Financial Advice for College Students Who Just Graduated

Budgeting basics

While graduating from college is an exciting milestone, it also introduces a new set of financial responsibilities. Budgeting is critical, and recent trends reinforce this fact. The Survey of Household Economics and Decision-making 2022 findings show declining financial well-being. (U.S Federal Reserve Board, 2023). 35% of adults stated they were financially worse off than a year earlier.  

Therefore, practical financial advice for college students, especially on budgeting, is valuable as you venture into the post-graduation world. A budget isn’t just about limiting what you can spend; it's about giving you the freedom to spend without guilt or stress. Here's how to craft a budget that works for you: 

Understand your income and expenses 

The first step in crafting an effective budgeting plan is getting a clear picture of your financial landscape. Outline all your income sources, including your salary, freelance work and other sources like dividends or interest from investments. Then, diligently track every expense, no matter how small. It's about understanding your financial flow—where each dollar comes from and where it's destined to go. 

Embrace the 50/30/20 Rule 

A simple yet effective budgeting guideline is the 50/30/20 Rule. Allocate half of your net income to necessities (rent or mortgage, groceries and utilities), 30% to wants (dining out, hobbies and subscriptions) and 20% to debt repayment and savings. This rule offers a balanced approach. You cover essential costs while still allowing for enjoyment and financial growth. 

Tailor your budget to fit your goals 

Your budget should reflect your personal and financial goals. It's a living document that adapts alongside your evolving aspirations. Whether it's accelerating student loan payments, saving for a dream vacation or building an emergency fund, adjust your budget to prioritize these goals. Regularly reviewing and tweaking your budget ensures it remains aligned with your objectives. 

Leverage budgeting tools 

One of the best financial tips for college students is to integrate technology into budgeting. Numerous online apps and tools simplify the budgeting process. See if your financial institution has tools within their online banking platform, or explore budget apps like PocketGuard, Goodbudget and You Need a Budget (YNAB). These tools can help you effortlessly track your spending, set budgeting goals and receive alerts to prevent overspending. 

Saving strategies

The other key skill after budgeting is how to save money. The journey of a thousand miles begins with a single step, and the same principle applies to saving. Even with modest amounts, starting early in your career can harness the power of compound interest, turning small seeds into substantial financial growth over time.

Start with an emergency fund
According to Bankrate’s 2024 emergency savings report, only 44% of Americans can afford a $1000 emergency expense from savings, highlighting the financial fragility of most households. Establishing an emergency fund is crucial before you venture into saving for long-term goals.

Ideally, this fund will cover 3–6 months of living expenses and is your financial safety net for unexpected life events, such as job loss or sudden medical bills. If that amounts seems daunting, start with a smaller goal like $1,000 and work up from there. The key is to get started. It allows you to navigate life’s surprises without derailing your financial goals.

Set clear, achievable goals
Saving becomes more meaningful when tied to specific goals. Whether it’s a down payment for your first home, a dream vacation or furthering your education, setting clear and achievable objectives provides motivation and direction. Break down your financial goals into manageable milestones and track your progress.

Explore high-interest savings accounts
One of the top financial tips for college students is maximizing the growth of their savings. Opt for savings accounts with competitive interest rates, often found in online banks, which offer higher yields than traditional brick-and-mortar institutions. A high-yield savings account can significantly affect how quickly your savings grow.

Automate your savings
Consistency is crucial in building savings, and automation is your best ally. Setting up automatic transfers to your savings account ensures that savings become non-negotiable. Even if you start with as little as $20 a month, over time, these contributions will compound, significantly increasing your savings without requiring daily effort.

Navigating loans and debt

Lastly, graduates often face the challenge of managing and paying off student loans and other loans. According to Experian data, the average student loan balance in 2023 was $38,787. That’s an onerous financial burden to begin your post-graduation life with. Thus, you require a strategic approach to ensure your debt situation is manageable and less overwhelming.

Assess your debt situation

Begin by listing all your debts, including student loans, credit cards and any other obligations. Note the interest rates, monthly payments and due dates for each.

Refinancing opportunities

One of the top pieces of financial advice for college students relates to refinancing. If you have private student loans or high-interest debt, refinancing can lower your interest rates and monthly payments, easing your financial burden.

“Refinancing your student loans means spending less money on interest over time and, thus, putting more money back into your pocket. For this reason, the best time to refinance your student loans to maximize your savings is as soon as you graduate.” (Gravier, 2023, para. 2)

Although refinancing your student loans has the potential to lower your interest rates and monthly payments, it’s important to talk to your loan officer and ensure it’s the right choice for you. Refinancing federal student loans means loss of potential benefits, such as forbearance or deferment options, income driven repayment plans, and potential loan forgiveness.

Adopt the debt avalanche method

Prioritizing the highest interest-rate debts will save you money in the long run. Continue minimum payments on all debts but allocate any windfalls or extra funds to the debt with the highest rate first.

Automate payments

Setting up automatic payments prevents late fees and hits on your credit score. Besides, if you enroll in an autopay program – where your monthly payment is directly deducted from your bank account—many loan service providers offer a 0.25% interest rate reduction.

Ask for help

Managing debt repayment can be complex, but you don't have to go it alone. Take advantage of the available resources to guide you through the process. Federal Student Aid has numerous resources to help you explore your options regarding debt repayment and loan forgiveness at StudentAid.gov.

FAQs

What are the best budgeting practices for recent college graduates? 

Effective budgeting practices start with setting realistic financial goals and applying the 50/30/20 Rule. Then, consistently track your income and expenses to understand where your money goes and adjust your spending to prioritize savings and debt repayment. Budgeting tools through your financial institution or apps like Goodbudget or YNAB can simplify this process, offering insights into your spending patterns and helping you stay on track. 

How can I start saving money even with a tight budget? 

You can start by establishing a small emergency fund to cover unexpected expenses, which can help prevent you from falling into debt. Look for areas in your budget where you can cut back, such as dining out less often or canceling unused subscriptions. Lastly, setting up automatic transfers to a savings account can help make saving a regular habit. 

What are some smart investment options for someone just starting their career? 

For those beginning their career, smart investment options include low-cost index funds and ETFs, which offer diversification and lower risk. Consider contributing to a Roth IRA or your employer’s 401(k) plan, especially if they offer matching contributions. Robo-advisors can also be a good option for beginners, offering a diversified investment portfolio based on your risk tolerance and goals. 

How do I prioritize my student loan payments alongside other financial goals? 

Prioritizing student loan payments alongside other financial goals requires a strategic approach. Begin by ensuring you make minimum payments on all debts to avoid penalties. Federal student loans offer various repayment plans and forgiveness programs that can ease the financial burden. Explore these options to tailor your repayment strategy to your financial situation.

Consider prioritizing high-interest debt for quicker repayment, enroll in autopay to potentially reduce interest rates, and explore refinancing options for lower rates, particularly if your credit has improved.

Additionally, don't overlook the importance of building emergency savings and contributing to retirement accounts. Even modest contributions can accumulate over time, providing financial security. Seeking guidance from a financial coach or student loan debt counseling service can provide valuable insights and personalized advice to help navigate repayment options and achieve financial goals effectively.

Are there any financial tools or resources offered by Ent Credit Union for recent graduates? 

Ent Credit Union offers a variety of tools and resources to recent graduates. These include financial education workshops, one-on-one financial counseling and online tools like budget calculators and savings goal trackers. Additionally, Ent Credit Union provides investment vehicles like CDs and investment advice and resources to help you make informed decisions about your financial future. 

Citations

Elizabeth Gravier (2023, November 3). Here is the best time to refinance your student loans. CNBC. https://www.cnbc.com/select/the-best-time-to-refinance-student-loans/ 

FINRA (2023, August 1) The Beginner’s Guide to 401(k)s. https://www.finra.org/investors/insights/beginners-guide-401ks 

U.S. Federal Reserve Board (2023, May 22) Economic Well-Being of U.S. Households in 2022. https://www.federalreserve.gov/publications/2023-economic-well-being-of-us-households-in-2022-executive-summary.htm