6 money tips for recent graduates | CNN affairs (2023)

New York CNN

Becoming a working adult out of college or high school is exciting... and it can be a little scary if it's your first time making a living.

One way to reduce anxiety is to take control of your finances. No matter how much you earn or how much you owe, adopting some good money habits will benefit you not only in your 20s, but for the rest of your life.

"It will take a lot of stress out of future decisions," says Shari Greco Reiches, behavioral economics expert, financial advisor, and author of Maximize Your Return on Life.

Here are just a few smart money moves to get you started.

1. Try to live within your means

Ideally, you spend less than you earn and save the rest.

This gives you more freedom to invest your energy in what matters most to you, such as where and how you live, work and travel.

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But to live within your means, you have to make decisions based on your priorities (not those of your friends who may be living bigger than you can afford).

"You can have everything you want, but not everything. So choose the most important thing," Reiches said.

2. Know your money

Find out how much money you bring in, how much you spend and how much you save. Also, know what you spend on things you like but don't really need. This way you know where you can possibly save costs.

Reiches suggests the 50/20/30 rule as a guideline. Take your gross income and subtract thatFederal, state and local income taxesplus Social Security and Medicare taxes withheld from your wages. (If you do this on a salary basis and you get paid biweekly, multiply this result by 26 to get an annual after-tax value, since you receive 26 paychecks per year.)

Man with mobile phone and laptop in the office Adobe Stock 5 Savings mistakes people make when building their financial lives

Use no more than 50% of this after-tax income for essential expenses (rent, utilities, groceries, transportation, etc.). Another 20% goes to short- and long-term savingsGoaland installments on high-yield debt. And the remaining 30% can be used for discretionary expenses (apparel, entertainment, food, travel, gifts, etc.).

The 50/20/30 rule is not fixed. For example, if you live in a high-cost area, your rent may exceed 50 percent of basic necessities. You then have the choice between saving elsewhere or lowering your housing costs by, for example, living with roommates.

Your employee benefits can also help cover some expenses, such as subsidized gym memberships or free on-site medical services, subsidized transportation, and other discounts.

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3. Don't trust money you don't have yet

You heard it, you have a bonus. They expect an increase. Maybe someone in your family will send you birthday money. And a friend still has to pay you back last year's holiday. All this money can come true. But until then, don't spend it in advance because you have no control over when it comes or how much you get.

4. Use a little to get a lot of protection

When you're young, healthy, and financially strapped, it's tempting to forego health insurance because you assume the chances of getting seriously ill are slim. True, but they are not zero. And your youth and good looks do not protect you against (expensive) injuries in a bicycle or car accident.

Because a health crisis can easily cost you $50,000 or more if you don't have insurance, health insurance can protect you from unhealthy debt for years to come.

"It's the No. 1 safety net you need," says Jonathan Clements, founder of the website HumbleDollar and editor of the new book My Money Journey: How 30 People Found Financial Freedom - and You Can Too.

If you're under age 26 and can continue to follow your parents' employer-sponsored health plan, you'll save money.

If you don't have a parenting plan and you're a freelancer or contractor, you can get catastrophic coverage or a bronze plan in the health insurance market. (If your income is low enough, you may even be eligible for a tax credit to offset the costs.) If you have e.g. earn $40,000, the average bronze plan premium for a non-smoker is $103 per monththis calculatorby KFF.

If you work full-time for an employer, choose an affordable option from the subsidized plans offered.

5. Keep it simple

It becomes difficult to keep track of all your purchases and other expenses when you use multiple payment methods (debit cards, credit cards, payment apps, etc.).

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If possible, optimize your payment methods.

Credit score concept on smartphone screen, checking payment history at bank Song_about_summer/Adobe Stock Don't Believe These 8 Common Credit Score Myths

Clements recommends having only two credit cards: one with a low credit limit (e.g. $1,000 - $2,000) that you use as a "circulating" card for purchases. The other, with a higher limit (e.g. $5,000), should be kept at home and used only for emergencies and travel.

This way you limit the amount of your fees (and make it easier to pay your monthly bills, avoiding late interest and penalties). In addition, it improves your credit score because you never charge too high a percentage of your total credit limit. (Clements points out that if you're using it for an occasional small purchase, you should still count the card with the higher limit toward your total credit limit so that certain activity on the card can be reported to the credit bureaus. Paying more than one credit limit at a time complete and timely monthly billing also helps determine your credit rating.)

When using payment apps, choose one and not several. If you have an iPhone and use Apple Pay, it can also act as your "walk-around" card, he said.

6. Pay your future self

With luck you will get older - much older. (No, not your 30s. More like your 60s, 70s, and 80s.)

"Think about your future self, because one day you will be that person," Clements said.

Adobe Stock Congratulations on your first order! Here's what you can do with your 401(k).
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And that person will greatly appreciate that after decades of hard work, they have enough money to afford the housing, health care, and lifestyle they want.

You may not earn much now, but you have the best source for accumulating wealth: savings for decades.

This means that even very small amounts of money saved can turn into real money over the years.

Let's say you only save $100 a month - that's about $3.33 a day. If you average an annual return of 7% over a 40-year period (which assumes a more conservative investment strategy than someone your age should), you could have $264,112 in your early 60scomposition ability.

Of course, your salary -- and your ability to save more -- will likely grow over time.

And bonus: If your employer offers a 401(k) plan, some of your contributions will be matched by your company. The extra "free" money will pay off in abundance over time. So make sure you put enough into your plan to get the full amount.

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How much money should I have saved after college? ›

Ideally, new graduates should work to create an emergency savings account with at least three to six months' worth of living expenses, but even an extra $200 or so can be a good place to start. The last 30% of your budget can go toward spending on nonessential expenses like travel, eating out and shopping.

How do you budget your finances after you graduate? ›

How to Create a Budget After Graduating College
  1. Step 1: Get Real About Your Income. ...
  2. Step 2: Determine Your Fixed Expenses. ...
  3. Step 3: Calculate What You Have Left. ...
  4. Step 4: Determine Your Savings Goals. ...
  5. Step 5: Think: What Does a Full Life Look Like to Me? ...
  6. Step 6: Look at Your Spending from Previous Months.
Sep 1, 2022

How do I manage my finances after college? ›

4 Tips for Managing Finances After College Graduation
  1. Evaluate your checking and savings accounts. Student checking accounts offer great benefits, such as waived ATM and monthly service fees. ...
  2. Stay on top of student loans. ...
  3. Start saving for retirement. ...
  4. Use credit wisely.

How can I improve my finances? ›

39 Ways to Improve Your Personal Finances
  1. Get your overspending under control. ...
  2. Create a new budget. ...
  3. Find a budgeting app you like. ...
  4. Make a will. ...
  5. Protect your savings from inflation. ...
  6. Prepare for rising interest rates. ...
  7. Prepare now for your next major life event. ...
  8. Boost your retirement savings.

What is the 1 3 rule with college savings? ›

Setting a College Savings Goal

One third of future college costs will come from past income (college savings), one third from current income and financial aid, and one third from future income (student loans). College costs go up by about a factor of three over any 17-year period.

What is the 50 30 20 rule? ›

One of the most common percentage-based budgets is the 50/30/20 rule. The idea is to divide your income into three categories, spending 50% on needs, 30% on wants, and 20% on savings. Learn more about the 50/30/20 budget rule and if it's right for you.

What's the biggest way to save money after graduation? ›

15 Best Money Tips for College Graduates (or anyone in their 20's)
  1. Save at least 20%-25% of your paycheck.
  2. Start tracking your money & investments in one place.
  3. Build better money habits.
  4. Don't wait for the perfect job.
  5. Take risks.
  6. Minimize your biggest expenses.
  7. Start investing.
  8. Put as much into your 401k as possible.
Oct 21, 2022

How to budget to save $5,000? ›

How to Save $5,000 in One Year
  1. Break it down into months.
  2. Track your spending.
  3. Cut your expenses.
  4. Take advantage of windfalls.
  5. Join an accountability group.
  6. Get a side hustle.
  7. Try a no-spend challenge.
Feb 17, 2023

What are 4 ways to achieve financial success during college and after graduation? ›

The following 5 steps will put you on track to succeed financially throughout not just college but also life after school.
  • Create a Budget. ...
  • Start an Emergency Fund. ...
  • Fill Out the FAFSA Form and Apply for Scholarships. ...
  • Start Building Credit and Know Your Credit Score. ...
  • Start Planning for Retirement. ...
  • Conclusion: ...
  • Author's Bio:
Apr 13, 2022

What is average net worth by age? ›

Mean and median net worth by age (2019)
Age GroupMean Net WorthMedian Net Worth
Less than 35$76,300$13,900
2 more rows
Nov 30, 2022

What are some financial goals after college? ›

Solid financial goals for students include creating a budget, opening a savings account, beginning to invest for retirement, establishing an emergency fund, applying for financial aid, beginning to build credit, and using debt as little as possible.

How do I stop struggling with money? ›

Struggling Financially? 6 Steps to Turn Things Around
  1. Get on a budget. ...
  2. Cut expenses. ...
  3. Save up an emergency fund. ...
  4. Stop incurring new debt and make a debt payoff plan. ...
  5. Earn extra income. ...
  6. Automate your financial life.
May 11, 2019

How do I manage my money wisely? ›

Money Management Tips
  1. Create a budget: Making a budget is the first and the most important step of money management. ...
  2. Save first, spend later: ...
  3. Set financial goals: ...
  4. Start investing early: ...
  5. Avoid debt: ...
  6. Save Early: ...
  7. Ensure protection against emergencies:

How do you stay positive when struggling financially? ›

How to survive financial stress
  1. Stay active. Keep seeing your friends, keep your CV up to date, and try to keep paying the bills. ...
  2. Get advice. If you're going into debt, get advice on how to prioritise your debts. ...
  3. Do not drink too much alcohol. ...
  4. Do not give up your daily routine.

What is the 50% rule in college? ›

It's often called the 50 percent rule: giving students half-credit no matter what, even if they don't show up to class. It's designed to motivate struggling students. But some educators believe it's rewarding bad behavior.

What is the 60% rule in college? ›

The purpose of the 60% rule is to ensure that during the fall and spring semesters, full-time certificated employees are not working in excess. It also make sure that during the summer term, all full-time and part-time certificated employees are not working in excess. This ensures the quality of teaching.

What is the 15 savings rule? ›

It's Fidelity's simple rule of thumb for saving and spending: Aim to allocate no more than 50% of take-home pay to essential expenses, save 15% of pretax income for retirement savings, and keep 5% of take-home pay for short-term savings.

What is the 50 15 5 rule? ›

50 - Consider allocating no more than 50 percent of take-home pay to essential expenses. 15 - Try to save 15 percent of pretax income (including employer contributions) for retirement. 5 - Save for the unexpected by keeping 5 percent of take-home pay in short-term savings for unplanned expenses.

What are the five pillars of financial literacy? ›

At a glance. Discussed are the 5 pillars of financial literacy: earn, save and invest, protect, spend and borrow.

What is the 40 40 20 budget rule? ›

It goes like this: 40% of income should go towards necessities (such as rent/mortgage, utilities, and groceries) 30% should go towards discretionary spending (such as dining out, entertainment, and shopping) - Hubble Spending Money Account is just for this. 20% should go towards savings or paying off debt.

How to save $100 000 in 5 years? ›

If you can afford to put away $1,400 per month, you could potentially save your first $100k in just 5 years. If that's too much, aim for even half that (or whatever you can). Thanks to compound interest, just $700 per month could become $100k in 9 years. “The first $100,000 is the hardest to save.”

How to save $10,000 dollars in one year? ›

How To Save $10,000 in a Year
  1. Break Down the Amount You Need To Save.
  2. Review Your Budget and Personal Finances.
  3. Cut Out Unnecessary Monthly Spending.
  4. Don't Pay Interest on Your Credit Cards.
  5. Reduce Discretionary Spending.
  6. Check Your Grocery Bill.
  7. Examine Your Fixed Expenses.
  8. Save Your Windfalls in an Emergency Fund.
Feb 2, 2023

How to save $5000 in 12 months? ›

Trying to save $5,000 in one year is near impossible if you wait until the last few of the 52 weeks to actually start saving. If you take advantage of the whole 52 weeks, however, you can do it by just saving $416.67 a month, $192.31 biweekly, $96.16 a week, or $13.70 a day.

Is it good to save $100 a week? ›

Two, if you start saving now, taking advantage of the miracle of compounding over 40 years, you'll easily pile up enough to live comfortably in later life (and most people don't achieve that). Here's how to do it: Save $100 a week from age 25 to 65 and you will have about $1.1 million, assuming a 7% annualized return.

Can I save $1,000 in 6 months? ›

Say you want to save $1,000 in six months. That breaks down to about $167 a month (round up to $200 to get there faster or down to $150 to give yourself more time). On a smaller scale, it's about $42 a week. A thousand dollars may seem intimidating, but bite-sized amounts feel more achievable.

How to save $2,000 fast? ›

5 Ways to Save Close to $2,000 in One Year
  1. 1) Cut out one coffee or drink per week. Do you get coffee daily or get a drink on a frequent basis? ...
  2. 2) Cut out eating out once per week. ...
  3. 3) Use Store Apps for groceries. ...
  4. 4) Unused subscriptions/memberships. ...
  5. 5) Find local free entertainment or stay at home.

What are 3 steps to financial success? ›

Here are seven key tips for pursuing financial success.
  • Save Automatically. ...
  • Invest in a Workplace Retirement Plan. ...
  • Create an Emergency Fund. ...
  • Stick to a Budget. ...
  • Pay Off Credit Cards. ...
  • Avoid High-Interest Loans. ...
  • Pay Bills on Time.
Nov 3, 2022

What are the first 4 steps to financial success? ›

4 Steps to Financial Success
  1. Step 1: Know Your Numbers. Comparing your income to monthly payments will help you budget for savings. ...
  2. Step 2: Protect What's Yours. Insurance is the best defense against the unexpected. ...
  3. Step 3: Fund Your Future. How do you see your retirement? ...
  4. Step 4: Build Your Wealth.

Is $500 a good graduation gift? ›

Children - Anywhere from $50 to $500 or more is appropriate for a parent, depending on how much financial help they have offered throughout the college years. Close relatives like grandchildren, nieces, nephews, and siblings - If you're a close family member of the graduate, expect to give around $50 to $200.

How do you survive financially in grad school? ›

How to Get Through Grad School Debt-Free
  1. Find Programs With Research or Teaching Assistantships. ...
  2. Merit Scholarships. ...
  3. Look for a One-Year Program. ...
  4. Get a Part-Time Job. ...
  5. Consider Attending a Public School. ...
  6. Find a Niche Program. ...
  7. Work First, Learn Later. ...
  8. Find a Job With Tuition Reimbursement.

Is $100 a good college graduation gift? ›

Cash offerings for college graduates tend to range from $100–$500. A parent will often give a gift of $50–$100 for an undergraduate degree. If the college degree is advanced (think master's or doctorate), then the amount can go up by $100 for each degree.

Is $5 million enough to retire at 55? ›

With $5 million you can plan on retiring early almost anywhere. While you should be more careful with your money in extremely high-cost areas, this size nest egg can generate more than $100,000 per year of income. That should be more than enough to live comfortably on starting at age 55.

What should a 25 year olds net worth be? ›

If you are between ages 25-29, the average is $49,388 and the median is even further behind at $7,512. If you are between the ages of 30-34, the average net worth is $122,700 and the median net worth is $35,112. Between the ages of 35-39, the average is $274,112 and the median is $55,519.

Is $5 million enough to retire at 60? ›

Based on the median costs of living in most parts of America, $5 million is more than enough for a very comfortable retirement. Based on average market returns, $5 million can support many households indefinitely.

What are 4 types of financial goals? ›

Financial goals comprise earning, saving, investing and spending in proportions that match your short-term, medium-term or long-term plans.

What are 5 financial benefits of a college degree? ›

What do you gain from attending college?
  • Higher lifetime earnings. Research consistently links a college education with higher earnings. ...
  • Lower unemployment rates. When you earn a college degree, you're helping to protect yourself from unemployment. ...
  • Increased job opportunities. ...
  • Better health, job satisfaction, and more.

How can I stop being broke anymore? ›

How to Stop Being Broke – 9 Things to Do
  1. Learn to live below your means. ...
  2. Develop a skill. ...
  3. If you already have a skill, get better at it. ...
  4. Only lend money you can afford to lose. ...
  5. Use the 50/30/20 rule. ...
  6. Stop buying on impulse. ...
  7. Avoid debts as much as possible. ...
  8. Stay Away from Get-Rich-Quick Schemes.
Feb 10, 2023

How much money do you need to not worry about money? ›

Its boosters generally say that 25X your expected annual expenses is enough. So if $50,000 a year is enough for you to live comfortably, you need to save $1.25 million. There are other more elaborate calculators that can give you a sense of what financial independence means for you.

What is financial anxiety? ›

Money anxiety involves intense worry, fear, and stress about finances, whether personal, business, or both. Money anxiety happens not only to people experiencing poverty, but also working and business professionals. While there are serious mental and physical health implications, effective treatment is available.

How to spend $1,000 wisely? ›

10 Smart Ways to Spend $1,000
  1. Spend the money.
  2. Pay down credit card debt.
  3. Pay down student loan debt.
  4. Contribute to your 401(k), Roth IRA or other retirement account.
  5. Make home repairs.
  6. Invest in yourself.
  7. Open a 529 account.
  8. Refinance your home.

What are 3 key ways to manage your money? ›

How to manage your money better
  • Make a personal budget. ...
  • Track your spending. ...
  • Save for retirement. ...
  • Save for emergencies. ...
  • Plan to pay off debt. ...
  • Establish good credit habits. ...
  • Improve your money mindset.

What is the number one rule of money management? ›

The rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must-have or must-do. The remaining half should be split up between 20% savings and debt repayment and 30% to everything else that you might want.

What not to say to a financially struggling person? ›

We put together this list of statements to avoid saying to a friend who's working toward financial fitness, and what you can do instead.
  • “Treat Yo Self.” ...
  • “Our favorite store is having a sale.” ...
  • “Just put it on your credit card.” ...
  • “Maybe you can find another job that pays better.” ...
  • “I can loan you some cash.”
Nov 26, 2022

How do I know if I'm doing OK financially? ›

The most common signs of a financially stable person include having little to no debt, being able to make and stick to a budget, having a healthy amount of money in savings, and having a good credit score. Financially stable people tend to see their net worth increase year over year.

Why do I get so stressed about money? ›

Anyone can experience financial stress, but financial stress may occur more often in households with low incomes. 2 Stress can result from not making enough money to meet your needs such as paying rent, paying the bills, and buying groceries. People with less income might experience additional stress due to their jobs.

How much money does the average college student have saved? ›

Average savings by education level
EducationMedian bank account balanceMean bank account balance
No high school diploma$1,020$9,190
High school diploma$2,500$20,100
Some college$3,900$23,550
Bachelor's degree$15,400$78,890
Dec 21, 2022

What is the 2k rule for college savings? ›

The rule is simple. Multiply your child's age by $2,000. That tells you how much you should have saved already at that specific age to be on track to cover 50 percent of college costs.

How much should I have saved for college by age 2? ›

As a quick rule of thumb, Fidelity offers another shorthand to tell whether or not you're on track. The “2 in 10” Rule states that for every $10,000 per year of college help you want to offer, you multiply your child's age by $2,000. That's how much you should have saved at each age. Consider a few examples.

How much should I save for college in 2030? ›

According to the US Department of Education, the average annual cost of public school increased 6.5 percent each year over the last decade. That means that by 2030, annual public tuition will be $44,047. The total cost for a four-year degree will be more than $205,000.

Is $20 000 a good amount of savings? ›

Is $20,000 a Good Amount of Savings? Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.

How much does the average 30 year old have in savings? ›

Average savings by age
Age groupAverage savings balance
Under 35$11,200
2 more rows
Mar 23, 2022

How much do middle class have in savings? ›

Savings by Household Income
PercentileAverage Household Income 20192019 Median Savings
20-39.9$ 35,600$ 2,050
40-59.9$ 59,000$ 4,320
60-79.9$ 96,800$ 10,000
80-89.9$ 153,500$ 20,000
2 more rows
Feb 28, 2023

What is the 27.40 rule saving money? ›

If you take $10,000 and break it down into smaller, “bit-size” chunks you come to 27.40 per day, $192.30 per week, $384.62 per fortnight or $833.33 per month. From here you need to match the timing of your income (pay cycle or business income cycle) and then take that amount out each time period.

What is the rule of thumb for college? ›

The general rule of thumb regarding college studying is, that for each class, students should spend approximately 2-3 hours of study time for each hour that they spend in class. Non-science courses: For every 1 unit you are enrolled, you are recommended to spend approximately two hours outside of class studying.

Are 529 plans worth it? ›

Is a 529 Plan Worth It? The advantages of a 529 plan make it a smart way to save for college in certain circumstances. For example, if you're sure you've got a child who's destined for higher education and you can afford to make contributions, the 529 plan is an excellent way to go.

How much will 529 plan be worth? ›

How Much You Should Have In Your 529 At Different Ages
AgeLow EndHigh End
14 more rows
Sep 30, 2022

How much will a 529 grow in 18 years? ›

If you save $100 a month for 18 years, your ending balance could be $35,400. If you save $100 a month for 9 years, your ending balance could be about $13,900.

How much should I put in my 529 each month? ›

Ideally, you should save at least $250 per month if you anticipate your child attending an in-state college (four years, public), $450 per month for an out-of-state public four-year college, and $550 per month for a private non-profit four-year college, from birth to college enrollment.

Is it possible to save 100k in 5 years? ›

If you can afford to put away $1,400 per month, you could potentially save your first $100k in just 5 years. If that's too much, aim for even half that (or whatever you can). Thanks to compound interest, just $700 per month could become $100k in 9 years. “The first $100,000 is the hardest to save.”

How to save $100k in 10 years? ›

Our findings. We determined that if an investor achieves a 3% annual return on his or her assets, he or she would need to invest $710 each month for ten years to reach $100,000 with a $1,000 beginning amount. By the year 2031, the investment would be worth a total of $100,566.


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