Financial Planning Tips for Recent College Graduates

Key Financial Steps Every Graduate Should Take

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If you're on the verge of graduating from college or you've recently graduated, congratulations! For many young adults, college graduation marks a major transition into adulthood and the world of post-graduate employment. It also ushers in a new phase of personal finance.

Not every decision you make in your 20s will have lasting effects on the course of your adult life; there are some that have bigger implications than others. Many of the decisions you'll make will center on your finances.

Learn some useful and common-sense pieces of advice to start building a solid financial foundation after graduation.

Look at More Than Salary

The average starting salary for the class of 2022 ranged from about $51,000 for humanities majors to almost $76,000 for computer science majors, according to the National Association of Colleges and Employers (NACE).

You want your job to cover the cost of living in your area. But more money doesn't always equal greater job satisfaction. Be sure to consider other factors, such as health and retirement benefits, workplace culture, and potential for career growth.

In some cases, a lower-paying entry job in your desired field is likely to be a better deal in the long run than a higher-paying job in a field you don't want to stay in. Accepting a job in an unrelated field simply because it pays more can either delay your career progress or worse, trap you in a field of work that you dislike. 

Consider Moving in With Your Parents

As of October 2020, 43% of young adults (18- through 29-year-olds) lived with one or both of their parents, down from 49% in June of the same year. While the spike was largely a result of the coronavirus pandemic, about half of new grads tend to move back home after graduation, often due to overwhelming student loan debt.

When you're just starting out and need to build up your savings, moving in with your parents can be a smart money move. It will lower your living expenses while you find your financial feet. It will also help you determine what your actual living expenses will be so you don't move into a place that's more than you can afford.

Once you've been at your job for a few months, though, look for a place you can live on your own or with roommates. It's difficult to move back home when you've been independent at college, and you'll grow faster and learn more by being on your own, even though it may be a struggle at first.


Many college graduates return to their parents' home to save money, but some lack the discipline required to save and end up spending their earnings on wants like entertainment, electronic gadgets, and social life. Moving home will work for you only if you're sure you won't fall into that spending trap.

Don't Buy a New Car

You may be tired of driving a clunker in college or having no car at all, but buying a brand new car is a costly mistake that could keep you on a tight budget for years. Instead, look for a used car that you can afford. If used cars at a dealership are out of your budget, you can ask around to see if a family friend or neighbor is selling a used car, which might be a cheaper route.

You can also consider moving to an area with good public transit options or walkability so that you don't need to buy a car at all.

Make Budgeting a Habit

The majority of Americans have no idea how much money they spent in the last month, according to a 2020 survey conducted by Intuit. Only 23% of Gen Z knew what they'd spent, and 27% of millennials did. If you're in that category, it's time to create and stick to a budget.

Budgeting isn't simply an exercise of "living within your means," but rather it's about being knowledgeable and prepared for whatever life throws at you financially. By tracking your income and spending, you can avoid credit card debt and work towards goals like travel or buying a house.

Think of a budget as a spending plan to guide your spending and saving so you can have the things you really want. Don't get sucked into trying to afford a certain lifestyle if it's not possible right now.

Build an Emergency Fund

In addition to maintaining a budget, consider adopting an emergency fund. This stowed-away amount of money will be your safety net in case of unexpected financial trouble, such as a car accident or losing your job.

Ideally, you want to have three to six months' worth of expenses saved up. But don't let that number intimidate you. Start small while you build your fund, for example, by setting aside $50 per month. An extra $500 or $1,000 will help out a lot when you have surprise expenses.


Put the money for your emergency fund in a high-yield savings account. It will still be quickly accessible if you need it, and it will earn more interest than it would in a normal checking or savings account.

Get Health Insurance Right Away

While you were in school, you were probably covered by your parents' health insurance or had a policy through your college. Now that you're on your own, though, you will need to be responsible for your own coverage.

If you're young and healthy, health insurance can seem like an unnecessary expense. But medical bills can be financially devastating if you have to pay them out of pocket. In the United States, 50% of adults had medical debt, of whom 23% owed more than $5,000 and 11% owed more than $10,000 as of September 2021.

Your job may come with health benefits. If not, you can purchase it through your state's health insurance marketplace. If you don't yet have an income, you may be eligible for Medicaid. No matter what type of coverage you have, use it when you need to, especially preventative care such as annual appointments, screenings, and vaccines. These are available at no extra cost to you.

Start Saving and Investing

Half of Americans have less than $250 left over each month after accounting for their necessary expenses and regular spending, according to a 2021 survey from The Balance, and 12% have nothing at all.

When you're creating your budget, be sure to incorporate savings into your expenses equation. This means building up your emergency fund, saving up for larger future purchases, and yes, contributing to a retirement account.

If you're lucky enough to have access to an employer retirement plan like a 401(k), use it. If they offer some sort of contribution match, try to maximize it. If not, open an individual retirement account (IRA) and begin making contributions there. By starting to save for retirement in your 20s, you can greatly impact your future financial security.


In addition to investing in retirement, consider allocating your funds in other investments. By starting early, you'll have more time to build a hefty nest egg.

Pay Off Debt

If you're leaving college with debt of some kind, such as student loans or credit card debt, make a plan to pay it off.

For student loans, you can get on an income-based repayment plan so your monthly payment isn't more than you can afford. If you don't currently have a job, you can request that your loan be put in forbearance, so you don't have to make payments until you have an income.

If you have credit card debt, you'll want to focus on paying that off before anything else. Otherwise, the interest you pay on this kind of debt can end up being worth more than the original purchases you made. Consider using the avalanche or snowball methods to pay off one debt at a time until you are debt-free.

Learn About Personal Finance

How do you open a brokerage account? Is it better to pay off a mortgage early or invest the extra money? How do you improve your credit score?

Taking time to learn about personal finance won't just help you become financially independent. It will help you stay that way by allowing you to avoid costly mistakes. It will also help you build wealth so you can live more comfortably and retire when you want,

The best way to learn about personal finance basics is to find a financial expert whose methods resonate with you and study their advice. You can also talk with a financial advisor (you might be able to find one for free through your work or bank) to create a financial plan specific to your goals. Decide which way you learn the best, and dive into content that can help you build a financially secure future.

Frequently Asked Questions (FAQs)

How do you create a budget after graduating college?

A budget is a spending plan that tracks your income and expenses. This allows you to make sure you aren't spending more than you earn. Start with your income. Subtract your mandatory expenses (housing, utilities, debt payments, etc.) and savings (retirement, emergency fund, etc.). The amount left over is what you have to spend for discretionary expenses, such as clothing or entertainment.

How much money should I have saved after college?

If you didn't work through college, or you were paying your living expenses or tuition, you might not have much saved. However, once you have a job, you can begin putting away money for retirement and building an emergency fund. Don't worry too much about the total amount you need to have saved. Instead, focus on saving a small amount each month as you find your feet financially.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. National Association of Colleges and Employers. "Winter 2022 Salary Survey, Executive Summary," Page 3.

  2. Harvard Joint Center for Housing Studies. "After a Brief Return, Young Adults Quick To Move Out of Parents Homes as the Pandemic Continues."

  3. Intuit. "Survey: 65% of Americans Have No Idea How Much They Spent Last Month."

  4. "Many Americans Still Can’t Pay Off Less Than $5,000 in Medical Debt."

  5. Federal Student Aid. "Income-Driven Repayment Plans,"

  6. Federal Student Aid. "Student Loan Forbearance Allows You To Temporarily Stop Making Payments."

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