CONGRATS! You are now college graduates – Welcome to the real world that brings about real responsibilities.  You are no longer someone’s dependent and now have to depend solely on you!  No worries – while it seems like a giant step, it will only be as hard as you make it.  It will not as difficult for some of you who are already living on your own and taking care of yourselves.  Some of you can learn from these simple steps as well.

This is a vital time in your life where you will have to learn some spending discipline.  Your days of spending money just because is now over.  It is time to think about saving for emergencies such as car repairs, medical bills, and other unforeseen expenses that can and will happen.  You will have to reduce your disposable income and increase that “savings” category on your budget that you have created.

Here’s 8 money saving tips that will help you increase your savings and be more conscious about your spending:

  1. Create a budget – You will soon get an idea of how much your take home pay is after taxes.  You will also need to write down your expenses every month.  This will let you know how much disposable income you have to spend and save.
  2. Cut back on Spending – Try to avoid excessive spending that you were able to do on your parent’s dime.  Reduce your entertaining expenses, such as restaurants, joy riding, and going to the movies.
  3. Consider roommates or renting a room – Find ways to cut down on your household expenses.  Splitting your household expenses will someone else will allow you to pay bills off early and save more money.  Another option is to move back in with your parents for one or two years, which will allow you to save a set amount of money every month.
  4. Pay off your student loans quick – Paying off your student loans quick will reduce your expenses and allow you to save more.  I always suggest not getting student loans if you can help it.  I also strongly suggest that you start paying on your loans BEFORE your payment become due.
  5. Do not add anymore debt – Putting yourself in more debt at this time will reduce your debt to equity ratio (i.e., effect your credit score). Pay off your large loans and other expenses you may have create while in college (i.e., credit cards or car loans). Maintaining a healthy credit score will help you in the long run when it is time to purchase a home for your family or a building for your business.
  6. Build and emergency fund – As I mentioned earlier, unforeseen circumstances can and will arise.  Be ready and get prepared for them.  Your goal should be to save at least 6 months of your living expenses.  Job are not made to last forever.  Unfortunately, layoffs do exist and can happen to you.
  7. Enroll in your company’s health insurance plan fast – Now that you are no longer covered under your parent’s insurance, you should have your own health coverage.  Those unforeseen circumstances could very well be a medical issue.  You should be prepared.
  8. Start Investing Immediately – If your are not putting money towards your 401k or an IRA, start today!  Most companies will match a portion of what you put towards your 401k.  This is a tax-deferred option and you should really take advantage of this.  Saving for your retirement in your 20s will pay off for you in your 60s.  The longer to wait to start saving for retirement, the less money you will have.

Good Luck!

Valerie Y. Waller, PhD