After Graduation: Spending Your Newly-Pocketed Money Wisely

After graduationThis post is part of an “after college” series for the launch of my upcoming free ebook “Money After College.”  You can sign up for my email list to receive your free copy when it’s released in early May.

After graduation is an exciting time, emotionally and financially.  You (hopefully) already have a job lined up where you’ll earn more than you ever have in your life.  Perhaps you’ll also receive cash gifts as a graduation present from friends and family, too.  Life is great as you embark on a whole new journey in life. But, let’s come back to earth a bit before you go out right away and grab all the stuff you’ve worked your way through four years of college to get.  After all, you haven’t hit the big time yet.

I’ll admit that I’ve been guilty of going out and spending right after finishing my first four years of college.  I bought a new HDTV and PlayStation 3, which cost me over $1,000 combined.  I also bought some new clothes and other things to “reward” myself.  Before I knew it, most of my graduation gift was gone.  Here’s some tips to avoid the same mistakes that I made.

Resisting big spending mistakes

Don’t spend money just because you can.  This little blip of income in your life is going to disappear quickly, especially if you start spending money before you’ve earned it.  Before you start spending wildly, realize that just because you’re earning a few hundred bucks a week doesn’t mean that’s all fun money.

Ask yourself “Would this purchase make sense if I was still in college?” If you were like most college students out there, you probably didn’t have too much money to go around.  You might have eaten ramen or drank Natty Ice (or both, simultaneously) and hope to never have to go down that path again.  Even though you might not want to live like like a pauper any more, you should try to maintain that lifestyle for as long as you can.  It will help greatly in your ability to pay down college debt and save for retirement.

Plan your purchases wisely. Don’t buy on impulse. I enjoyed my PlayStation for about a year before I got tired of it and ended up selling it (for about half of what I paid originally).  I regret that purchase and would much prefer to have that cash in my savings account right now instead.  If you are planning on making any large purchases (> $100), think about it for at least a few days before buying.

Don’t go out and buy the brand-new fancy car. Yep, this one gets it’s own section.  I’ve seen it so many times.  If you’re trying to recover from four years of loans (and potentially credit card debt), buying a new car is one of the worst decisions you can make.  If you do need a car, purchase something a few years older that will cost a lot less.  There are lots of benefits of owning a used car.  If you’re living in a metro area where there’s public transportation, Zipcar, or bike access, you might not need to own a car at all.

Allow yourself a few nice things that you’ve been waiting to buy.  I think all life victories deserve celebration.  Graduating college is probably your biggest accomplishment at age 22, so it’s certainly no exception.  Treat yourself to a nice night out for dinner, a DVD or two, and a book to further help you plan your finances (I recommend Ramit’s I Will Teach You To Be Rich).

Save some money and start paying down any debt.  Trust me, loan payments are coming at you fast and you’re not going to enjoy it.  If you don’t have loans, there’s going to be a time in the future when you need this money and can use it on something better. Save as much as you can, and you’re making a great decision.

3 Easy Steps to Start

In 3 steps, here’s what I’d do with the first $1,000 after graduation (gifted from family/friends or earned at a job):

1. Have fun with $200.  Do whatever you want with this.

2. Put $300 in the bank in an ING Savings account.  Save this for an emergency or some other important expense in the future.

3. Open a Roth IRA and deposit the final $500 in this account. Research index funds and start investing.

This is a fantastic foundation, which you can build on with a more sophisticated savings and investing strategy.

If you’re about to graduate, how do you plan to spend?  If you’re past graduation (like me), do you have any advice?

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photo by: Werwin15

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What To Do At 22: Life Lessons For College Grads

Jumping off a cliffAt the time of year where many 22-year-olds will graduate college, I fittingly stumbled upon a post called “8 Things I Wish I Knew When I was 22” on  It’s written by Christine Gilbert who, at age 31, quit her Fortune 500 job to travel full-time and start a new career. Her story is fascinating and probably a bit of a fantasy for most of us.  But she did it, which leads me to question: How did she do it, and can I (still) do it, too?

At age 25 1/2, I’m about halfway from 22 to 31 now.  I’m not about to cry over getting old, but I have important career/life decisions to make this year.  I was interested in exploring Christine’s advice.  At first glance, she is definitely a lot more fearless than I am!  Here are some of the highlights from her post.

Don’t give in to the pressure to be practical

My favorite “thing” on the list: “Pick a career you love; you don’t have to give into the pressure to be practical.” I’ve always felt the pressure to follow a practical path, both at age 22 and today.  While I’m always hearing advice like “do what you love” and “follow your dreams,”I don’t think those people who say it really mean it or live by it. If I told them “Okay, my dreams are to travel the world and work remotely from wherever I’d like,” most of my advice-givers would be severely skeptical of that plan.

Others have told me that I should at least try to get a “real, 9 to 5 job” and see what it’s like before I dismiss it.  But if I’m already adverse to having a job that I’m nearly certain I won’t like, should I even bother going down that path? Will I just be wasting my time taking that job in the first place? I’m guessing Christine would say “yes.”

I would definitely encourage any graduate to at least try something you love that’s not necessarily practical and do it for a year.  Age 22 is the best time to try things out.  I’m not saying be ridiculous and rack up credit card debt.  Take a chance on something that pays little but has a huge upside for your life if you end up loving it. You have almost nothing to lose, and later in life may be too late.

Loans, debts, and safety nets

From a personal finance perspective, Christine’s points that “your student loans can be deferred practically indefinitely” and “you don’t need a safety net” are enough to make my stomach churn as I’m sitting here.  But maybe she does have a point.  Sure, your student loan debt interest will accrue, and it’s a bit scary to think about what would happen if you ran out of money and didn’t have a backup plan.  But what’s the worst that can really happen? The worst, realistic scenario I can imagine now (or at age 22) is moving back with my parents and maybe working a crappy job until I can straighten things out.

The big question in my mind: Is the worst thing that could happen worse than any regrets later in life? In my eyes, no, it’s not.  Yes, you could “fail,” which is something a lot of us are afraid of (or, as Seth Godin points out, we’re not really afraid of failure as much as we are afraid of criticism).  But one of my biggest fears is potentially regretting what I could’ve done with my life.  Playing it safe is overrated.

Adding to the list

I’m not too far removed from age 22 yet, but I’ll contribute a few things to the list:

1. Consider what you’ll do with a post-graduate education before earning an advanced degree. I may have chosen a different path given the job options in my field.

2. Do what you think is best for you. Don’t be afraid of what others will think of you for doing it. If you mess up, dust yourself off, learn from your mistakes, and continue on with life.

Do you have anything on your list for what you wish you knew when you were 22?  What advice would you give to someone about to graduate college? Post it below!

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photo by: Micah & Erin