Saving Tips For Recent Graduates

The New York Times has sagely advice for recent graduates wondering how to juggle saving on an entry-level salary. It is easier than you think:

  • Be mindful of seemingly inconsequential expenditures. Ask yourself each and every time you reach for your money: “Do I need this?” More than not, the answer will be”no”;
  • Strip your budget to the bare essentials. Not only will you save, but you will become accustomed to enjoying life without extravagant expenses;
  • Try to save 10% of your take-home pay in a 401k or Roth IRA;
  • If your employer offers a matching program, use it – it’s free money.
  • Keep the end goal in mind: “[Money] is most useful when you are old because it makes all the difference whether you wait for a bus in the rain to get to the doctor’s appointment or you ride in a cab.”

    Retirement may seem far off, but the sooner you start saving, the easier it will be to grow a nest egg. — CAREY GREENBERG-BERGER

    More Advice Graduates Don’t Want to Hear [NYT]
    (Photo: JP Puerta)

  • Comments

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    1. deltasleep says:

      I don’t understand- did these people NOT already live on bare essentials while they were IN college?
      Cause the prospect of a $30K teaching salary sounds like wealth to me, after years of living on way, way less.
      I’d say the biggest issue my generation of grads will have is entitlement. If you can’t afford and don’t need something, DON’T BUY IT. They’ve become way too accustomed to the inflated cost of luxury goods.

    2. Hawk07 says:

      “If you can’t afford and don’t need something, DON’T BUY IT.”

      That’s the way it was for thousands of years until something called “welfare” and “government subidized ______________” came into place. And also, credit started to have a huge role as well.

      I bet auto dealers feast on the recent college graduate market.

      I’m just waiting for the legislation for government subsidized HDTVs for the poor.

    3. Justinh6 says:

      My advice is to be cheap, own one late model car thats cheap to run and insure.

      Savers are losers, your 401k or CD’s are getting beat out by inflation.

      You are much better off buying real assets, such as real estate.

      Save for your first two family house, and rent the other side out.

      Then work on buying another one.

    4. Quattuor says:

      @Hawk7: Loving those government clichés, eh? Personally I blame credit far more than anything else. Kids getting assaulted by credit card companies on college campuses get used to spending spending spending on their parents’ dime, and then get out into the real world, rack up a few multiples of ten thousand in debt, and then the fun begins.

    5. swalve says:

      “Savers are losers, your 401k or CD’s are getting beat out by inflation.”

      Not mine…

    6. IRSistherootofallevil says:

      Uh my CD gets 5.1%. I’m pretty sure inflation isn’t 5%. Because if it was, the Feds would raise interest rates again.

    7. deltasleep says:

      Yes, Justin. Thats really bad advice, I hope you rethink that. Real Estate is not really a market I’d go diving into unless you know an area really well. Certain areas will become significantly less profitable than they have been in the past. It would be a good idea to have a mixed portfolio of high and low risk investments.
      And I blame credit too. Entitlement is so much more complex than welfare. I’m not just talking about the poor being entitled to a free/cheap place to live and eat, I’m talking about the middle class feeling entitled to a BMW. Everybody seems to be planning to absolutely max out everything they can afford. But I live in a poor state, I’m from a poor family, and I have poor friends. It’s like for a large segment of the population, paycheck to paycheck is so normal that even when they make good wages they manage to live that way.
      My wife and I’s biggest post-graduation plans include: not getting tied down to a $30,000 car, and not rushing into buying a house until we can live on 1 of our incomes and save 100% of the other’s income- another major advantage to being married.

    8. saram says:

      I’m going to have to disagree, Justinh6. My 401k earned about 12% last year, not including the 5% dumped in by employer. Also, my standard savings account at ING is earning 4.5%. I think I’m still ahead of inflation.

      However, I did also buy a “real asset” – my first condo. Though, I’m still in graduate school, so maybe the crazy debt-downfall entitlement madness just hasn’t set in yet.

    9. Charles Duffy says:

      @deltasleep: I lived on very little money through college, my first job, my second job… and then I acquired a house and a spouse.

      I don’t think I could have foreseen (or that I would have believed, if told at the time) the extent to which my expenses have jumped.

    10. etinterrapax says:

      That was a good, wise article. I think the advice least likely to be taken is to live simply. It’s precisely because the average new grad’s starting salary feels like wealth after college, that young workers overspend and begin to be accustomed to an unnecessary level of luxury. I’m nothing like a teetotaler, and I’m appalled at some of my younger friends’ entertainment–read, liquor–budgets. Easily three figures, possibly four, per month, and it is not business-driven entertainment. I never found it to be a wise use of money to go out drinking frequently, never mind the toll on one’s health. Even sharing a couple of bottles of wine at home is more frugal than going out.

      It’s no longer a question of whether our generation is doing as well as our parents’ did. We aren’t. In real dollars, we earn less. But we can bitch about it and dig ourselves into debt, or make the most of what we have and press on with our other assets, like our educations and the opportunities to come.

    11. EtherealStrife says:

      Heh as a greedy bastard I live like a pauper. Water and tea to drink, simple cheap food to eat. You’d be amazed how little you really need to spend to get by comfortably. Rabbit ears for the TV, library for books, about the only think I pay a monthly fee for is DSL and that’s ridiculously cheap here. Water heater has been turned off for years, along with the ac/heater (fan for summer, blankets and sweatshirts for winter). And a low-maintenance car with good mileage. Life is good.

      “[Money] is most useful when you are old because it makes all the difference whether you wait for a bus in the rain to get to the doctor’s appointment or you ride in a cab.”

      If only it were that simple. A large chunk of the seniors in my area own massive caddys. Those things can plow through dozens of people without so much as a bump. It’d be nice if DMV ramped up the drive tests for the elderly, but so far the death toll is too low.

      “Watch infomercials for their entertainment value only.”

      Or just don’t watch em at all.

    12. formergr says:

      Hey I’m all for living simply and as a result was one of the few twenty-somethings I knew who never carried a credit card balance, but seriously you don’t use hot water?? Or am I misunderstanding when you say the water heater has been turned off for years? That’s hard core!

    13. Xkeeper says:

      Be mindful of seemingly inconsequential expenditures. Ask yourself each and every time you reach for your money: “Do I need this?” More than not, the answer will be”no”;

      Big words coming from the New York Times.

    14. EtherealStrife says:

      @formergr: Hot water is for the weak of will. =P I live in Southern California, so it’s quite bearable taking showers at room temperature, even in winter. Tanks waste incredible amounts of energy (continuously heating water throughout the day for just the 10 minutes or so that you actually need it), and electric pass-through water heaters suck up a sizable amount of electricity while operating. I do have an instant hot water dispenser for the kitchen faucet, but that’s all.

    15. MeOhMy says:

      I’d say the most glaring omission is DON’T BUY A CAR. And if you *must* buy a car because the beater you drove to your internship during your last year of college kicked the bucket, buy a CHEAP car. So many of my college friends rushed out and bought that $30k car…what a waste.

      Cause the prospect of a $30K teaching salary sounds like wealth to me, after years of living on way, way less

      I think that’s a key part of the danger. Suddenly you’re depositing $2000 in a month after previously scraping buy for 4-5-6-10 years. When you get down to it, that $2000 is a heck of a lot of money. It seems easy to just go spending it willy-nilly.

    16. @EtherealStrife: “Water heater has been turned off for years”

      Lol. Here you lose me. I did this in a COLD 3rd-world country and NEVER EVER AGAIN. To my mind, hot showers are the single greatest benefit of living in a first-world country! (well, okay, that and, like, having enough to eat.) So never again. At least not when it’s below freezing out.

      (But setting the heater at 120* and getting a water-saving showerhead — the aerating ones give better pressure than the low-flow ones — helps. And I dream of an on-point heater.)

    17. tozmervo says:

      As a new college graduate starting a new job in a week, this article really hits home. I’ve carefully looked at big expenditures I want/need to make and put them off for a couple of months until I’m well into my steady paycheck cycle and know my own monthly budget better.

      I just invested in my own pair of rabbit ears (in response to an earlier post) that is now attached to an extra family TV. I’m using the free wireless at a local restaurant to type up this post, although internet will probably be one of my first major expenditures in a few weeks. I even chose my new home very carefully so that I can use a bike to get around (the bike will be paid for with my employers “mass transit benifit”).

      Perhaps more importantly, though, I chose a new home with rent that I. Can. Afford. 80% of the other apartments in the area are outrageously priced, and usually boast really useless amenities like conference rooms. When on gods’ green earth do you need a conference room in your apartment complex? In two or three years I hope to be in the position to buy a place so that my money isn’t disappearing into the rental “black hole.”

      And just as an aside, I opened my first credit card account about three weeks ago. Amazing, I know, that I made it through five years of college without one.

    18. Anitra says:

      @Troy F.: It doesn’t have to be a “CHEAP” car. Just a sensible one – like a 2-4 yr old compact car (that you’ll drive into the ground). I’m done with buying beaters. They cost me just as much money in the long run.