dhavatar, Getty Images/iStockphoto
Editor's note: This article originally ran on Money Rates. It has been reprinted here with permission.
Robert Minasian has a simple message for his two adult children, both of whom recently left college behind: Save as much money now as you possibly can. Those major purchases that you think you need to make? Don't buy that new car or start looking for a home until you've built enough savings to steer you through a job loss or other financial disaster.
"Given the realities of our nation's precarious financial stability, I advise my children that they must plan on a future that may be substantially different than our past," says Minasian, a financial consultant with Personal Wealth Management LLC and Novus Investments LLC in Commerce, Michigan. "In other words, buckle down now. Sock the cash away and forgo that which you think you need."
Recent college graduates may find this to be timely advice. The job market is still challenging. College debt levels are climbing. The price of everything from apartment rent to gas is rising. Graduates face plenty of financial hurdles once they leave the world of academia, especially when those student loans come due.
Here are some critical tips for new college graduates from financial professionals across the country. Recent college grads who follow it might ease some of the stress of their journey to the working world.
Learn the difference between wants and needs
Rakesh Gupta, a professor of Garden City, New Jersey-based Adelphi University, teaches the "Your money AND your life" seminar for freshmen at the school. He knows the financial challenges that college students and recent graduates face.
His advice is simple: College grads need to put a budget down on paper, listing their monthly expenses and income. They then need to spend less than what they make, putting their savings in an interest-bearing account.
Finally, graduates need to think twice about purchasing large-ticket items, Gupta says.
"Is it something you want or is it a need?" he asks. "If you must have it, use your savings rather than a credit card."
Harness the power of rewards
Beverly Ladley, client segments and solutions executive at SunTrust Bank in Atlanta, says that recent graduates must find a reward that will motivate them to save money. Ladley recommends that graduates sign up for direct deposit with their employers and earmark a portion of their paycheck for automatic deposit to savings accounts.
But there's a twist to Ladley's advice: She recommends that graduates create several different accounts and label each with a tangible reward, calling the accounts anything from "new car" to "bachelorette party" to "weekend with the guys."
"Set up different accounts for different goals and meaningful experiences," Ladley says. "This establishes good financial habits motivated by tangible rewards."
Know the value of a plan
It's easy to save when you're making a lot of money. But Dean Obenauer, assistant director of financial aid for financial literacy at Creighton University in Omaha, Nebraska, says that even more important than a big income is a good financial plan.
Obenauer's plan for college graduates is simple but effective. First, graduates need to pay themselves first, making saving money a priority. Second, even though student-loan payments generally don't start until six months after graduation, recent grads should build their loan payments into their budgets immediately, perhaps setting aside the $500 a month they'll owe in an interest-bearing savings account. This helps grads get a jump on starting an emergency savings account before their regular payments come due.
- 11 guaranteed steps to cut family spending
- My view: Utah should not raise minimum wage
- 40 percent tax on employer insurance primed...
- Balancing act: To keep employees, focus on...
- Warehouse clubs: Where to find the savings
- 3 reasons you should crowdfund your business
- 4 signs you need to quit your job to advance...
- Dave Ramsey says: Charging off a debt doesn't...
- My view: Utah should not raise minimum... 41
- 40 percent tax on employer insurance... 20
- Warehouse clubs: Where to find the savings 8
- A multigenerational hit: Student debt... 3
- Balancing act: To keep employees, focus... 2
- Want to see if your relationship will... 2
- 11 guaranteed steps to cut family spending 1