It's college graduation time. That means those of us who have been around the block a few times can't resist sharing some of our sage advice with the young people who are preparing to start their professional lives.
While every decision you make when you're 21 or 22 won't irrevocably change the course of your life, a few may. On the other hand, being afraid to experiment or afraid to fail may keep you from important experiences.
"Your 20s really are the time to explore," says Jean Chatzky, financial editor of NBC's "Today" show, an author whose books include "Not Your Parents' Money Book" and the mother of a college-age son. "Before you get married and before you have kids, you don't have a lot of financial responsibilities."
The job market for new college graduates is improving somewhat. Employers plan to hire nearly 9 percent more new graduates this year than they did in 2013, according to a new survey by the National Association of Colleges and Employers. But the crushing amount of college debt is going to constrain the financial lives of many for years, maybe decades.
According to the Institute for College Access and Success, 71 percent of students who graduated from four-year colleges in 2012 were saddled with student loan debt, and the average debt load for those students was $29,400, a 25 percent increase from 2008.
Many college graduates live with their parents, which was considered unusual a generation ago. That can be a smart short-term plan, Chatzky says, emphasizing short-term. By not paying rent, a young person can build up a financial cushion and save for such things as a car, rent deposit or house down payment, graduate school or even a trip around the world.
Graduation is an excellent time to get your financial life started on the right foot. But it's not all about money. This is the advice Dick Costolo, CEO of Twitter, offered University of Michigan graduates in 2013:
"So far you guys have gotten where you are by meeting and exceeding expectations ... From here on out, you have to switch gears," he said. "There are no expectations. There is no script. When you're doing what you love to do, you become resilient ... If, on the other hand, you do what you think is expected of you, or what you're supposed to do, and chaos ensues -- as it surely will -- you will look to external sources for what to do next, because that will be the habit you've created for yourself. You'll be standing there frozen on the stage of your own life."
New college graduates would be wise to follow these 13 tips:
Establish credit, use it wisely and monitor your profile. "If you look at the people who are most prone to ID theft, it's not seniors -- it's college students," Chatzky says. "It's because they have such a substantial online profile. Unscrupulous persons can create a profile and pretend to be you."
Live within your means. Living below your means is even better. "Don't get stuck in lifestyle creep," advises LaTisha D. Styles, an investment analyst in Atlanta who started the Young Finances website four years ago at age 26.
When she received her annual cost-of-living raise the last few years, she increased her contribution to her 401(k) plan and stuck with a frugal lifestyle. "In the meantime, I stayed in the same apartment, spent roughly the same on groceries and entertainment and never really felt the financial crunch because my increased contributions were offset by less taxable income," she says.
[See: 9 Ways to Stretch Your Paycheck.]
Save money automatically. You can do it through payroll deduction, automatic withdrawal from your bank account or throwing change in a jar. "Building the habit of saving and setting money aside is more important than the amount in those first few years," says Julie Rains, the mother of a college sophomore who writes about personal finance for Wise Bread and her own blog, Working to Live Differently.
Take advantage of employer 401(k) plans. If your employer offers a 401(k) plan or equivalent, contribute as much as you can -- ideally at least enough to get the maximum employer match. "By not taking advantage of it, you're essentially leaving free money on the table and giving yourself a pay cut," says Robert Farrington, founder and editor-in-chief of The College Investor website. "The younger you are when you start, the more powerful compounding interest works for you. By starting at 22 vs. 30, you could add hundreds of thousands of dollars more to your retirement account."
Pay your bills on time. Not only is it a good habit, it will help you build credit and avoid exorbitant late fees.
Choose your friends wisely. Don't hang out with, or even consider dating, people who encourage you to spend your money foolishly. Those kinds of attitudes rub off. The dating part is especially important because you absolutely don't want to marry someone who doesn't share your financial values.
Weight the costs vs. benefits before going to graduate school. In some fields, such as education, a master's degree is a necessity. In others, having a master's degree grants few career benefits beyond what you learn. You don't want to accrue additional debt to get a degree that won't increase your salary. After you've been in the workplace several years, you may decide to change direction or your employer may pay your way.
Learn about personal finance and investing. The Internet is exploding with blogs and websites aimed at teaching 20-somethings how to manage their money. Read, learn and think ahead.
Don't expect to get a job by only filling out online applications. You are more likely to find a job through your college professors, parents, friends of parents and parents of friends, pastors, former babysitting clients and anyone else you know. This could require talking to people on the phone or in person. Just do it.
Clean up your social media profile. It's the first thing prospective employers will look at. If you don't already have a LinkedIn profile, create one to highlight skills you've gained through your education, your volunteer work or any jobs you've had so far. Remember to spell all the words right and don't trust autocorrect. First impressions are important.
Stay in touch with your college friends and professors. Networking is one of the most important career skills you'll ever learn, and social media has just made it easier. Decades after you graduate, you may get your dream job from the guy you played poker with as an undergraduate.
Learn to cook and clean. Not only will cooking save you money, but you'll also be healthier. If you don't already know how to clean and do laundry, pick up those skills, too. If you're living at home, it's an excellent trade for free rent.
Splurge on experiences, not things. This is not the time to buy a new Corvette or a designer wardrobe, even if you just got a wonderful job with a fabulous salary. You'll never be this free again. Take every opportunity to travel and try new experiences.
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