Financial Advice for College Graduate

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I still have some student loans that I am paying off.

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Pay those off ASAP.

Live like you are still a poor college student and save as much as you can. 45 year old you will appreciate it.

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Freeze_Warning
Ole Miss Fan
Member since Dec 2014
1 post

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Wow.

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I graduated last May and began working as a Civil Engineer this year. Obviously an engineering degree doesn't teach you near enough about finance. I am opening a 401K through my employer this month and have saved up some cash that I would rather do something with than let it sit in a checking account. I still have some student loans that I am paying off. What advice would you have for a 22 year old?

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Good stuff. Pay of loans. Pay them off asap. Toss money into Roth...you can never replace the time you have. Vanguard some if you have left over. Avoid constant binge drinking and use disposable income wisely.

Have insurance for all items now to avoid them becoming major expenses later. Do not skim on dental and health insurance. Take care of your stuff. Buy quality items once and take care of them - car, clothing, etc.

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1) save up enough to have ~3-6 months pay in an emergency account
2) meet the company match in your 401k
3) max a Roth

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This.

401k max is 18k. Roth is 5k, i think. So you should be putting all of your non liquid savings into these before you invest a dime in something else. Tax deferred and Tax Exempt accounts are pretty difficult to beat over the long term.

Find the appropriate balance between fun, travel, saving, and investing.

1) You can set yourself up really well by starting your own Roth IRA (minimum of 1k through Vanguard) and contributing when you can. Sure, maxing it out ($5,500 per year) would be terrific, but lets be real. You're 22.

2) Travel now if that's your thing. I don't regret my trips and I continue to travel as much as possible before kids.

3) If at all possible, wait a good while to get married or have kids. Don't spend much on any potential SO unless you're really serious.

4) Emergency funds are boring, but really nice to have. Mine is wayyy underfunded. I'd also recommend contributing to an HSA

5) Have some fun, but don't cripple your cash flow.

6) Don't get into credit card debt. No materialistic item is worth it.

7) If you intend to save, which you should, PAY YOURSELF FIRST. Save/invest and don't withdraw funds. Don't save with what's leftover, but Save first thing, then have your fun. If it's not obvious, you need a consistent budget.

Here is what I did right out of college working for a Fortune 500 and living with parents. By no means perfect, but it set me up very well when I had a baby and left to start my own business a few years later.

- 401k to company match 6%
- $400 into everyday checking account each paycheck. This was more than enough for food, booze, partying, golf, etc. Essentially my only expenses at the time.
- $250 every paycheck towards $5k loan I took out to backpack Europe after college. Took 10 months to pay off.
- $100 of every paycheck into fun money account. I spent this on random shite like duck decoys, golf clubs, hunting shite, LSU gear, etc. Stuff I didn't want to buy with my checking.
- Remaining balance auto deducted into savings. I never saw this money and never felt like I was losing it from my first day on the job. It was nice to see what it amounted to after 18 months at home.
- In your situation, pay off your student loans as quickly as possible.
- Avoid debt, but build credit. I had my first credit card when I was 18 and have never spent a dollar of interest on the 5 I have now. I put everything on a credit card and paid of weekly or 2x/week. Paid for 2-3 trips in full over the years.

Nobody will give you exact advice on where to put your money. Hit 401k to match, maybe throw some in an IRA, have some fun, and put the rest in savings. Enjoy that until you get married or have kids. I treated my $400 in checking like it was my only cash for the pay period. Kept me from being reckless, but was enough to enjoy myself.

As someone else said, the most important thing is finding a balance. Don't sacrifice the freedom and flexibility at this point in your life to throw a few more dollars towards your future. I went to LSU games, Vegas, NYC, and many other places all while being responsible and staying on a budget. Wouldn't trade that for anything.

I would pay off the student debt before setting up a Roth in addition to the company 401K. If your federal loans are on an 8 year repayment plan and you pay the full term, it will cost you $18,000 in interest. As young as you are, there will be plenty of time to increase saving in the retirement accounts as you get older.

quote:

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Find the appropriate balance between fun, travel, saving, and investing.

1) You can set yourself up really well by starting your own Roth IRA (minimum of 1k through Vanguard) and contributing when you can. Sure, maxing it out ($5,500 per year) would be terrific, but lets be real. You're 22.

2) Travel now if that's your thing. I don't regret my trips and I continue to travel as much as possible before kids.

3) If at all possible, wait a good while to get married or have kids. Don't spend much on any potential SO unless you're really serious.

4) Emergency funds are boring, but really nice to have. Mine is wayyy underfunded. I'd also recommend contributing to an HSA

5) Have some fun, but don't cripple your cash flow.

6) Don't get into credit card debt. No materialistic item is worth it.

7) If you intend to save, which you should, PAY YOURSELF FIRST. Save/invest and don't withdraw funds. Don't save with what's leftover, but Save first thing, then have your fun. If it's not obvious, you need a consistent budget.

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Most reasonable advice I've seen on here in awhile.

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Roth is 5k, i think.

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$5500, and this is the way to go. Can't beat tax free withdrawals at retirement. You also don't want the RMDs of a traditional IRA adding to your retirement income to the point where it drags you up into the next tax bracket.

I graduated last May and finally locked down a great job. My company has a 5% $1-$1 match and I'm maxing that out and throwing some of my bonus cash into that as well (Roth 401k)