Degree Rich, Money Poor: Financial Advice Every Graduate Should Know

December is almost here, and many of you will be graduating in a few weeks. Even though it’s the mid-year ceremony, don’t worry. Your diploma counts just the same as those spring-time grads. So now that you’re about to begin your life of social freedom and adult independence, let’s go over a few issues concerning your wallet.

You should already know the usual graduate etiquette: Write thank you cards to graduation gifters; don’t wear sneakers to the first job interview; oh, and invite fewer first dates over for ramen noodles. But don’t forget, in your early professional years you will also encounter many important financial decisions for the first time.

In the beginning, you will likely earn a meager paycheck and hold onto the ‘frugal student’ mentality–what we lovingly refer to as Degree Rich, Money Poor™. During this time, it will be much easier to build positive financial habits than it would be five years down the road, when you will have become accustomed to earning (and spending) more money.

The Intersection of Common Sense and Patience
Damon Darlin of the New York Times wrote an excellent article a few months back in which he passed his best financial words of wisdom to America’s newest college graduates:

• Learn to cook. You’ll save money, eat healthier, and your partner will love your culinary talents
• Never borrow money to pay for a depreciating asset (i.e. clothing, electronics, jewelry, furniture, etc.)
• Cut out the “latte habit”, those little purchases in your daily routine that add up to something more worthwhile and memorable.
• Find a partner and stay together. Study show that two can live more cheaply together than each alone and that divorce is a great destroyer of wealth
• Enroll in a 401k plan immediately, and save (more) money while you’re young. Not only do you harness the power of compounding, but you also become accustomed to a lower rate of consumption while working. This way, less money is needed in retirement.

It’s All About Three Principles
Mr. Darlin’s points are all valid and map very well with Lightship Mutual’s own Keys to Shine. It goes to show that presentation and style may differ, but experts all agree on three essential laws of personal finance:

1. Spend less than you earn
2. Make the money you have work for you
3. Prepare for the unexpected; save a little

Now you have the information, and we all know that information is power. Go forth, young graduates. It’s time to launch your financial ships into the open seas.