10 Cash Commandments For New Graduates
Editors Note: This article was originally published on Cassius on May 22, 2018.
Graduating—whether from high school, college or grad school—is one of the biggest milestones in life. It marks the start of a new chapter. The crazy thing is that while folks give graduates advice about a lot of things, money, one of the biggest responsibilities, is rarely discussed. Talking about finances is often considered taboo, or too personal. Unfortunately, the silence is deadly. We’ve all heard statistics that show the average student debt is around $30,000. Add in credit card debt, which averages around $15,000 per household, and it’s easy to see how folks end up living paycheck to paycheck. Staying out of the debt cycle and making smarter financial choices overall isn’t that hard. The problem is that too many folks don’t start talking about money until they’re in the hole, or realize that they’re way off a new financial mark. There’s only one way to win. People have to start sharing what they know.
“When you’re in school all of the focus is on graduation, and there are a lot of support systems, from student loans to parents to part-time jobs,” says personal finance expert Ash Cash. “That all changes post-graduation, so the earlier you develop good financial habits, the better off you are. You can live the life you want v. playing catch up.”
Regardless of one’s personal goals, there are some universal best practices when it comes to money. Here are the 10 things Cash says all grads should consider before they deposit that first check.
1. LIVE BELOW YOUR MEANS
After years of school, you likely want to do it big because you’re finally making money. While living the high life is great, saving money is the best move. In order to do that you have to live below your means. Cash suggests living on 80 percent of your income, so you can always save 20 percent. In order to do that all of your bills— from rent or mortgage to discretionary cash and vacations— need to take up less than 80 percent of your income. Once you stretch this muscle you’ll be a great saver. The habit will grant you more financial freedom and less stress. As an adult, you will need money for everything from emergencies to down payments. Do this and you will stay ready.
2. MAKE SHORT-MID-LONG TERM FINANCIAL GOALS
Thinking about where you want to be next, then in five years and then in 10+ years is a great way to stay motivated. You’re essential creating a financial roadmap so you know where you’re going, and this makes it harder to get off course when temptation arises.
3. LEARN TO BUDGET
There is power in knowing where your money is going. You will need to be able to budget effectively to maintain your credit, secure your household, run your business and, in some cases, keep a job. Set up an emergency fund, only for emergencies. Credit cards are not a cushion for a budget and should only be used to when you can pay off the full balance by the next payment cycle.
4. MAKE STRATEGIC CAREER CHOICES
Be intentional about your professional choices. Now is the time to take calculated risks because you likely have the least amount of responsibilities you’ll ever have in life. If you have a business idea, launch it. If there’s a job you want across the country or even the world, go for it.
5. CALCULATE A DEBT REPAYMENT PLAN—AND STICK TO IT
If you have student loans pay something on them. Letting them sit only allows more debt to accrue. Call your lender to determine whether you can consolidate your loans and negotiate a payment amount that makes sense for your budget. If you don’t have a business or other pressing obligations that require investment, make principal only pre-payments when you have influxes of cash from bonuses, tax returns or other sources.
6. INVEST IN YOUR RETIREMENT
Remember the 20 percent you’re supposed to be saving? Well 10 percent of it should go into retirement. Interest compounds over time so even small investments in your 20s have huge returns by your 60s. If you’re employed, make sure you match your company’s contribution.
7. START THAT BUSINESS
If you have an idea, launch it. The worst that can happen is it fails—and then you rebound and make it better or get a job. The best thing that can happen…well, it starts with Forbes. You can also have a job and side business. It’s important to think about diversifying your income streams to create. It will make you happier and less vulnerable to financial setbacks.
8. THINK HARD ON GRAD SCHOOL
Graduate school is typically a big financial investment that doesn’t always yield results. Make sure graduate school makes sense for your career goals—that means a guaranteed return. Don’t go because of prestige or professional boredom. Degrees don’t lead to jobs unless you have a strategy.
9. NEGOTIATE YOUR SALARY
Do your due diligence before closing deals or accepting job offers. Know the average pay for your field. Don’t be afraid to ask for more money if your offer is lower than it should be.
10. LOAN FROM OVERFLOW
Don’t loan money that is already budgeted into a bucket. In most cases, the money you loan will not be returned in a timely manner—or at all. Make sure the cash won’t impact your goals. Also refrain from allowing other people to use your credit. If they can’t manage their own credit they likely won’t be responsible with yours.