Today’s question comes from Jordyn in Florida…
“Hello Matt and Joel, my name is Jordyn. I currently attend college in beautiful Tallahassee, Florida. But I’m a senior, which means I’ll be graduating and starting my first full time job soon – in Austin, Texas!
Now thanks to y’all’s show, I do consider myself to be fairly financially literate. You know, I have a high yield savings account. I’ve been investing in a brokerage account for the last several years. And I will be graduating debt free, as my school was paid for by scholarships that I earned.
But I’m definitely a bit intimidated by everything that’s coming up in post grad life, especially a lot of the financial shifts taking place.
I’m about to be living alone for the first time, so I am thinking a lot about apartment hunting and how I’m going to furnish a new place.
I am about to buy my very first car, and add a lot of things to my budget that I’ve never had to contribute to before, like internet and phone bills, or car insurance, etc.
I’m happy with the offer that I got from my first full time job, and I feel secure in starting out. But I would love to hear any advice or first steps for students entering that post-grad life. I really do want to start off my adult life on the right financial foot. Thanks y’all.”
Matt & Joel’s response:
Congrats on graduating! You’re already light years ahead of so many of your peers, Jordyn.
I get the intimidation you mentioned, moving to a new city & state plus all those other financial changes can be overwhelming.
But having ZERO student loan debt is awesome! And the fact that you’ve been investing in your teens and early 20’s means you’ve got less financial baggage and better financial habits than most.
We’re impressed with motivated self-starters like you Jordyn because it’s just so rare. Our heads were in the clouds at your age!
We’ll do our best to offer you some helpful input, but part of our advice is just encouragement to keep those habits up!
Budget and avoid debt
It sounds like you’re already averse to debt. Keep that mindset!
Don’t allow yourself to take on any new debt until the point you’re ready to buy a house.
Yes, you’ve got a whole new list of expenses coming up. And it’s tempting to finance those purchases. But it’ll really hurt you in the long run and delay your potential money progress.
Instead, take your new salary and make a budget! Divide up your paychecks across all your expenses, and make sure everything fits. If you need to skimp on a few categories, that’s OK.
Do whatever it takes to avoid debt and live within your means.
Keep investing!
And since you’ve been regularly investing, keep that up!
You might want to change which accounts you emphasize now that you have a job. Prioritize those tax advantaged accounts rather than your brokerage account for maximum results.
We’re not sure what your benefits are at your new workplace, but a 401k match is top priority.
Then invest in your Roth IRA, then HSA, etc. You can follow the 7 money gears, or we’ve also written a guide here for what to invest in next.
For new grads (and young folks in general), it’s less about making excellent financial decisions and more about avoiding dumb decisions. Here are a few big traps and expenses you’ll want to avoid…
Buying a Car
That first job can feel like a flood of income. You’re using to living that ramen noodle college life after all! And it’s easy to raise your lifestyle quickly and spend that money.
For instance you mentioned getting a car. Lots of grads opt to buy a new car just because they can! And then they’re locked into payments for years to come.
Instead, please consider buying a cheap, used car. Ideally something that you could even pay cash for!
I’d say the older the better. Because a nice low-mileage 8-10 y/o car can help you save money on multiple fronts. It’s cheaper to insure, you’ll take less of a depreciation hit, and it takes less cash out of your pocket to buy.
Maybe consider a used EV thanks to the federal tax credit, if you have the ability to charge at home.
Depending on your job location you might be able to live close and avoid having a car at all. That’s a true financial win!
Renting an apartment
On the apartment and furniture front, Facebook Marketplace (and your local Buy Nothing Group) are your new best friends.
Even opting for Ikea to furnish that place can save you a ton of money. You can always upgrade pieces of furniture or home decor at a later date. But for starters, live within your budget and get comfortable with used items that might not line up exactly with your taste.
Maybe get that Costco mattress new (those are well-reviewed & very inexpensive) but make it a goal to go used for everything else.
Since you’re moving to a new town, we definitely recommend renting – not buying. And splitting costs with roommates will be the cheapest route to start out with.
If you love the city and see yourself staying longer term, maybe try a house hack if you decide you want to buy.
Keep wants in check
We’ve said it already. But it’s worth repeating… Live within your means and don’t spend money you don’t have!
It’s not that you can’t inflate your lifestyle at all. You totally should spend more money now that you’re making more! No-one wants to live the college student life in perpetuity.
But the more you can keep your desires in check, slowly inflating your standard of living, the more financial flexibility you’ll have. That’s the biggest trap youngin’s fall into. They spend money they don’t have, then it becomes a habit. It handicaps them for decades.
Start a budget, even if it’s just a rough guideline. Spend within your means, and keep squirreling money away towards your savings and investment goals.
You’ll build wealth more quickly, giving ‘future you’ waaaaay more options.
The Bottom Line:
Congrats on your upcoming graduation. And starting your post-grad life debt free! You’re truly in a better financial position than most young folks your age.
To keep that good momentum going, build a budget based on your new job’s salary. Divide your paychecks into needs, wants, and savings for retirement. As long as you spend within your means, you’ll be right as rain.
The biggest financial blunders for young folks are overspending on cars, fancy living arrangements, or taking on debt to purchase toys (like electronics and stuff). It sounds like you have a good head on your shoulders. Keep up the good work, Jordyn!
For the full version of this discussion, check out Podcast Episode #814 (it’s the 2nd question in the episode)
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