Personal finance recommendations for new or recent graduates
LinkedIn has a Question and Answer board where I recently asked the question:
My question is whether anybody out there has personal finance recommendations for new or recent graduates. I’m open to any suggestions or ideas including products or services, books, blogs, or budgeting tools. Many of us are looking at major purchases including cars or homes. The rent vs buy decision is pertinent and any advice on that would be awesome.
Lots of great responses. Here are some of the best ones. Joseph Bowden at Citi Smith Barney suggests using Google to find a rent versus buy calculator. I found one at Dinkytown.net which looks sophisticated enough. The New York Times version I found might have a better reputational value.
Kelli Pence a controller for West Music Company, Inc wrote an especially compelling response giving advice similar to the advice I had from some of my college professors out of undergrad.
One of the best pieces of advice given to me from an MBA professor during my last semester – that I WISH I would have listened to – was “do NOT make ANY major purchases or life decisions your first year out of college!”
His advice was to live like you do normally – and sit on the extra income. Don’t get married. Don’t buy a boat. Don’t buy a house. Don’t buy a brand new car. You can be a LITTLE crazy – you want to feel like you accomplished something after all. But save the majority of it. He said this for many reasons, none of which I remember.
The best response, sent privately, was from a former supervisor.
I was so lost when I was done with school and took my first job . I was broke, had student loans, a tiny bit of credit card debt (which I was able to get rid of within a year fortunately) and a very measly paycheck! So I don’t have my advice to offer, except to take advantage of an employer’s 401K if you’re lucky enough to be able to do so. I held off on doing that my first couple of years and regretted it. I thought the extra $100/month or whatever in my pocket was worth missing out – probably not in the long run! I’d also say if you can buy, buy. The equity is worth it!
Sure does give me and my fellow grads plenty to think about.
Three books came up in the recommendations.
The Only Investment Guide You’ll Ever Need by Andrew Tobias, Personal Finance for Dummies, and Young, Fabulous, and Broke by Suzi Orman.
Any Queercents readers have input on the topic? What about those books? Thumbs up? Thumbs down?
I’d give a very strong thumbs-up to the “Young Fabulous and Broke” book by Suze Orman. I’ve given it to one or two of my friends and recommended it to others — pretty much anyone I know under the age of 35 who was struggling to make sense of their finances, or just wanted to learn more. It does an excellent job of guiding people through all the pros and cons of saving, paying down debt, contemplating grad school or career changes, investing through various types of accounts, etc. I’ve known people who were pretty skeptical of Suze Orman, since their only exposure to her is through public television where she’s about 25% financial advice and 75% motivational speaker. Rest assured that the ratio is skewed about 75% financial and 25% motivational in her books.
Ditto to the ‘sit on it for a year’ advice! Figuring out what it is that you’ll want to do with the $ often takes a bit of time – what I thought was important when I was a student often was a lot less pressing when I was working more regular (and more numerous) hours than the ones I’d been pulling previously. Especially when it comes to big decisions like rent vs buy, I think that it makes a lot of sense to wait and see what will work best with your new lifestyle. What neighborhoods do you really want to live in/ how much space do you want 5 years from now/ what’s the market look like in your area? Also, it’s way nicer to splurge occasionally while keeping to a student budget than it is to have to cut back from a really exuberant celebration-based one. The phrase ‘golden handcuffs’ exists for good reason!
My concrete advice for any grad is short –
1. put as much in your 401k/403b/whatever as you can up to your employer’s match, and put as much as you can into a Roth IRA.
2. pay down any non-student loan debt that you can
3. make sure you’ve checked out your credit score recently – especially if you’re looking into car loans and mortgages, having a few months to straighten out any issues can make a big difference in your rates!
4. celebrate some! Especially if you’re going into a demanding job, spending mindlessly is a really easy habit to fall into, so making it a special occasion lets you indulge consciously.