How to Get from College to the Real World Financially

Making the transition from college to career is tough enough without having to deal with finances. It can be overwhelming, but by doing just a few things now, it won’t be long before you’ll be miles ahead of most of your peers and even most people in their 30s.

Live Like You’re Still in College

Post college, we get a strong desire to step up to better accommodations, a new ride, nicer clothes, etc. The feeling that you should reward yourself isn’t a bad one. Just don’t let it get out of hand and start living at or above your new means. If you can maintain that frugal college mindset and keep your spending under control for just a few more months or even an extra year, you’ll be so much farther ahead. The point is to not run out and drastically upgrade your lifestyle before your savings and debt repayment get going. I know this is hard. But if you do it, you’ll be rewarded. There are free services available on the Web, like Personal Capital, that will help you track your spending.

Make a Plan to Pay Off Debt

You may have accumulated credit card debt over your college years. Or your student loan payments are set to begin. Now is as good a time as any to get aggressive with paying down those debts as quick as possible. The quicker you do, the more money you’ll be able to put towards savings and fun. Not to mention all the interest charges you can usually avoid by paying them off early. Focus on eliminating that credit card debt first. Added bonus: If you increase the gap between your credit balances and limits, you’ll also boost your credit score.

Related: Improve Your Credit Score with Our Ultimate Guide to Credit

Start a Savings Plan

Now that you have a plan to take care of your debts, spend some time developing a plan to save up some money. Think about your short and mid-range savings goals. This could be things like a newer car, a suit, a down payment for a house, a vacation, or even a wedding. Or simply saving up a nice emergency fund so that you don’t have to go into debt when the unexpected strikes.

Once you have your goals and how much it will take to fund them, set up a monthly savings plan coinciding with your paycheck. I prefer to have make my savings plan as automatic as possible. Your Human Resource department can set this up for you. All you need is your savings account and routing numbers.

Speaking of savings accounts, don’t just put your short-term savings in any old bank. Find an online high-yield savings account to stash your cash in. They are easy to setup and use, and they pay great interest compared with regular savings accounts.

The 401K: Free Money Towards Retirement

Lastly, let’s talk about the greatest tool you have for preparing for a prosperous retirement: the 401K. Hopefully your first employer will auto-enroll you in your company’s 401K. And if you work for one of the companies that pay a 401K match, you’ll start receiving free money towards you’re retirement. The 401K match is an excellent benefit. If you’re company doesn’t auto-enroll you in the 401K plan, make sure you sign up as soon as possible and at least begin contributing enough each paycheck to get the full company match. This account will also help you reduce your current tax liability. Who doesn’t want to pay less in taxes?

As for what to invest in, you’ll want to have a well-diversified portfolio that meets your risk tolerance. Most entry-level employees (with at least 30 yrs until retirement) can benefit from a target-date retirement fund. These funds automatically adjust to a more conservative set of investments as you age. They are more expensive, but they take the hassle out of manually re-adjusting your accounts every year. This would make a great fund to start with until you learn more about your investment style and risk tolerance and can move into less managed funds.

Once you get comfortable with the 401K and the match, check out the Roth IRA.

To all the recent college graduates, I offer my congratulations. And I wish you the best with your careers, and with managing your finances.

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About Philip Taylor, CPA

Philip Taylor, aka "PT", is a CPA, blogger, podcaster, husband, and father of three. PT is also the founder and CEO of the personal finance industry conference and trade show, FinCon. He created Part-Time Money® back in 2007 to share his advice on money, hold himself accountable (while paying off over $75k in debt), and to meet others passionate about moving toward financial independence. He uses Personal Capital to track his wealth. All the content on this blog is original and created or edited by PT.


  1. Tim Gordon says

    I totally agree with your first advice. Living like you are still in college lets you stay in a track where you can save more money and not spend more money than what is necessary. A plan to pay your debt is also a good one.