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Financial Playbook for Recent College Graduates

April 18, 2013
Loans, Student Loans
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With graduation fast approaching, many students are about to enter the real world. It’s an exciting time, but life can throw some real curveballs, especially for those just starting out. How you handle these financial roadblocks can make a world of difference.

Graduated! …No job.

Don’t panic, and don’t feel alone – there are many recent (and not-so-recent) graduates in exactly the same boat.

What to do: You’ll have to downgrade your lifestyle until you find a gig. This might mean moving back in with the folks if you can (not ideal, but certainly not the worst case scenario) or opting for a cheaper apartment. This is especially true if the cost of living in your area is high.

What not to do: You may be inclined to jump on the first “Now Hiring” sign you see and load up your schedule to make ends meet. However, keep in mind that searching for a career in your chosen field takes a lot of time and energy. A 40+ hour workweek bartending might leave you too exhausted to seek a better job.  You could, however, get a part-time job for extra cash and make sure you leave yourself time to look for a new job.

Moving! …Rent down payment?

What you might not know if you’ve never leased an apartment is that the down payment to secure a place can be crushing to your bank account.  Often times, you’ll need to front the first and last month’s rent amount PLUS a security deposit.

What to do: If you can’t come up with the dough on your own, the best solution is to seek help from family or close friends. If you’ve managed to find a job, then you might also check if they reimburse moving expenses, or can provide an advance on your paycheck. As a last resort, you could try services like RentShare to pay your landlord with a credit card. Be aware, such services usually charge fees somewhere in the ballpark of 2-3%, and your credit limit might not be high enough to cover the full amount.

What not to do:  Whatever you do, do not turn to payday lenders or cash advance operations. Their fees and interest rates are exorbitant and you’ll struggle to repay them.

Employed! …401k plan?

Everyone knows they should save for retirement, but if you’re like many a recent grad, you have no clue what a 401k plan is or how to invest.

What to do: Take advantage of your company’s 401k plan! Simple as that. A portion of your paycheck will be automatically set aside for retirement savings. Luckily, you don’t have to be a Warren Buffett to invest your funds wisely. Mutual funds allow you to diversify investments with a minimum of effort on your part. If you have a variety of options, make sure to choose a fund that has a low expense ratio.

Check out this Q&A for more on 401k plans.

Even if your company does not offer a 401k plan, you can still contribute to an IRA and earn a similar tax advantage.

What not to do: Blow your entire paycheck. The longer you wait to start saving, the more difficult it will be to retire comfortably. Keep in mind that a 401k plan is a privilege, not a right – especially if your employer matches some of your contributions. Many Americans don’t have access to a 401k plan, and you may not in the future, so you shouldn’t waste your opportunity.

Finally, independence! …Insurance?

Many students leave insurance matters to their parents throughout college. Come graduation, however, you might suddenly find yourself on the hook for regular premiums.

What to do:

Auto insurance

If you’re a driver and haven’t been paying for your own car insurance until now, you’ll need to get started. You might be more comfortable staying with your parent’s provider, but they won’t always offer you the best rates, so make sure to compare before you commit. Finally, if you don’t actually own a car but do borrow a car on occasion, you don’t need full-blown coverage, but you should consider a non-owner policy to help cover your liability in the case of an accident.

Health insurance

If you’re under age 26, thanks to the Affordable Care Act, you are still able to remain on your parent’s insurance regardless of marriage status, employment, residence, etc. However, any dental or vision insurance you previously received under a parent’s employer-based plan could be taken away once you graduate.

Renters insurance

If you live in an apartment, you might not have to worry about damage to the building, but your personal possessions are another matter. Personal losses due to fire, flood, theft, etc. are not likely to be covered by your landlord’s insurance, so consider renter’s insurance to protect your stuff.

What not to do: Do not avoid shopping for insurance. Auto insurance is required if you own a car and, although you may not be required to purchase other types of insurance, they are often a good idea to protect against catastrophic losses.

Goodbye classes! …Hello student loan payments.

Unless you were lucky enough to get a free ride through college, student loans are a reality that you’ll face for at least the next few years.

What to do: First take a look at any and all loans that you’ve taken out to help pay for school. Then create a distinct plan of action:


As a general rule, you’ll want to pay back your highest interest loans (like any private loans) as soon as possible, so focus any extra repayment ability on those.

Know your federal repayment options

Federal loans come with a few key ways to help relieve the burden of student loan payments in certain situations: deferment and forbearance.

Consider consolidation

If you have any private loans, consolidation can help to lump them all into one (potentially lower) monthly payment. NerdWallet’s student loan calculator can help you understand the benefits or drawbacks that consolidation could mean for you.

First paycheck! …Need a new bank account.

Now that you’re out in the real world, you might find that the bank account you used through high school or college is no longer a good fit.

What to do: When you are first starting out, it’s best to seek out a free checking account, with no monthly fees or minimum balances. These are common at local institutions like credit unions and community banks, but you can also find online checking accounts if earning interest on your checking balance is important to you.

What not to do: Don’t sign up for any account without first understanding the fees you might face, and how to avoid them. Also, don’t disregard a small bank or credit union just because they lack a nationwide reach like Bank of America or Chase. Many local institutions partner with ATM or branch networks, like CU Service Centers or CO-OP, to give consumers easy access across the country.