When I graduated from college, I had moderate student loan debt and a small amount of credit card debt, but I had a solid job lined up and big dreams of establishing a strong financial foundation.
Four years later, I was married with a kid, tons of credit card debt, a car loan, additional other loans, an expensive lifestyle, and a financial situation so precarious I couldn’t keep the bills paid.
What happened? I started my life in the adult world without good financial practices and principles and that quickly led to a difficult financial situation.
I don’t look back with regret, but I do look back at those days and ask myself, “What did I mess up? What do I wish I had done differently?”
This is a list of eighteen simple things I’d change. These aren’t huge, life changing choices – a few of them might be for some people, but for most college graduates, everything on this list can easily be handled without disrupting the flow of life in one’s twenties.
I would love to send this list to every single person graduating from college as advice from someone who went through this, made a lot of avoidable mistakes, and came out on the other side.
Back then, I did actually manage to do a few of these things and they were positive things in isolation, but they were like stars on a dark night – tiny blips of light surrounded by the darkness of financial mistakes. The steps below all work in concert to create a strong financial backbone, and if you leave out most of them, you’ll still find yourself struggling financially and professionally. They synergize with each other in a powerful way.
Let’s dig in. Here are 18 simple financial things I wish I had done all together upon graduating from college.
Sign up for a 401(k) (or similar account) with a generous automatic contribution. This is the most important smart thing I did do, and I wish I had done it even bigger than I did. Looking back, it did not have any sort of negative impact on my standard of living, but what it did do is add a whole lot to my sense of financial stability now (fifteen years later or so) and going forward for the rest of my life.
The first day you start at your first post-graduation “real job,” go in and find out what their retirement plan is like. Do they offer a 401(k), 403(b), or a similar plan? Contribute to it, and make that contribution a nice healthy one. If they offer any kind of matching, you should be contributing more than enough to get every dime of it.
If your workplace doesn’t have a 401(k) or similar account, as soon as you get your first (or second) paycheck, open up a Roth IRA account on your own. It serves the same purpose as a 401(k), except that it withdraws cash from your checking account rather than right out of your paycheck. Set it up to automatically slurp out a certain amount or, if your workplace allows it, set it up to automatically pull money from your paycheck before you ever receive it. (I recommend signing up through Vanguard, Fidelity, or Schwab, all of which are great companies.)
Cook almost all my meals at home. I got into a very early habit of simply not eating many meals at home. I’d stop at a coffee shop for a big cup of coffee and usually a bagel. I’d eat lunch out with coworkers. I’d go out for supper almost every night with my wife. On the weekends, I’d usually skip breakfast, eat lunch out and about, and maybe make supper at home one of the weekend nights, like it was a big deal. One meal a week eaten at home wasn’t uncommon at all.
The problem with this routine is that it’s incredibly expensive. Meals eaten outside the home very commonly jump above the $10 mark, even for simple stuff. Meals I make at home these days often go below the $2 mark, occasionally below the $1 mark, and only approach the $10 mark if I’m making something very exceptional.
Total that up over the course of just a month. Let’s say Sarah and I started cooking at home instead of eating out and cut the price of an average meal from $8 to $4. Three meals a day, times two of us, times thirty days, times $4 saved per meal, gives us $720 a month. That’s a huge financial impact. Even for a single person, this is a $360 a month difference.
Shop for groceries with discount meats and vegetables as the starting point for my grocery list and meal plan. Back then, if I did go to a grocery store, I went in there with a vague idea of needing some beverages and snacks and some nebulous outline of one or two meals in my head. I inevitably filled my cart with a bunch of impulsive stuff I didn’t need, an excessive amount of items for those two meals I had in mind, and some duplicates of things I already had in the cupboard at home. I’d spend $80 or whatever and come home with some snacks and enough food for maybe two meals, and I spent a lot of time in there just wandering around rather aimlessly.
Now, I have a much better practice. I download the grocery store flyer from the grocery store’s website (and the grocery store I go to is a discount one – I checked a bunch of stores and stuck with the one with the cheapest default prices near me). I look at the on-sale produce and meat items. From that, I make a meal plan – a list of meals for each day that includes those ingredients. I then make a grocery list that includes those on-sale ingredients and everything else I need to make those meals. I then check the cupboards and make sure there’s nothing else I need, and if there is, I add it to the list. When I head to the store, the list has everything I need, so I just focus on that and largely ignore the other stuff on the shelves, which means a lot fewer unnecessary food items wound up in the cart, saving me both pounds and money. Plus, with a list, I spend a lot less time in the grocery store.
Establish healthy normal dietary patterns. In other words, I would start eating a diet that’s low cost, relatively low calorie, and based more on vegetables and fruits than on meat and dairy.
This does not mean abandoning all foods you like. It just means that for most meals that aren’t special occasions, stick to relatively healthy meals that are mostly vegetables and fruits. Make those kinds of meals your “default” and less healthy ones into “treats” or “special occasion” meals.
Not only are simpler plant-based meals less expensive, they’re going to have great health outcomes for you over the long term. Do this consistently during your adult life and you’ll feel healthier and energetic for much longer and avoid serious health problems until much later in life. Plus, you save money along the way.
Take leftovers to work each typical day. Unless there’s something special going on at work, aim to take leftovers to work with you each day for lunch. One good practice is to try to find other people who also do this and eat lunch with them. Is there a break room or a lunch room at your workplace? Find it and aim to eat there so that you can eat while also building professional networks.
If most of your opportunities for eating with coworkers involves eating out with them, do that sometimes, but don’t make it a daily routine. Instead, pencil it in once or twice a week and view the expense as one that’s more about building professional relationships than about the food.
This is just an extension of the previous idea of making low-cost meals based around fruits and vegetables the center of your life. This will save you money and will almost always be healthier than what you might otherwise eat.
Again, this doesn’t mean that every meal has to be “miserable.” Find fruits and vegetables you like. Try lots of things and figure out what you enjoy. Have a lot of variety in your meals.
Intentionally put aside a portion of my work day for skill and knowledge building, and another portion for professional network building. This might seem nearly impossible when you’re really crunched at work, but the time invested needs to be a routine part of your day or you will fall behind in your field and your career path. Take at least some time each day – maybe an hour for each – and devote that time to skill/knowledge building and networking.
Ideally, you find time for this during your workday, as these are tasks that are very helpful in the workplace and improve your value as a worker at your current job (while, of course, also helping your long term career). Do your best to block off time for these things at work. However, if necessary, it’s okay to do these tasks outside of the workplace. The key is to make sure that these tasks happen each and every day.
Skill and knowledge building is all about building the skills you need to stay up to date with your field at your current position as well as acquiring knowledge and skills needed at your next few positions. Know what you need to know and be able to do for your next job or two and start learning that stuff now. This may end up eating more than an hour a day if you need certifications and additional classes. Make time for this. It will make it easy for the people at your next job to hire you.
Network building is all about building connections to people in your field at your current level and in positions where they may hire or promote you. This also includes finding mentors at levels far above you. Social media helps with this – be as helpful and professional as you can on there with a healthy dollop of personable, and try to get to know lots of people individually. Professional meetings and conferences are also powerful opportunities for this. Local meetups are great. Any time you get a chance to present, particularly outside your organization and particularly to peers, is fantastic. Take advantage of all of those things. Build a huge list of people you know in your field, then take the time to regularly keep up with those people. It’s so valuable!
Get involved in social scenes and communities that involve your actual personal interests and passions. One of the big challenges that people often face after leaving school is what to do with their free time. Some people just continue to repeat the things they did in college. Others dive into what they perceive they “should” do in their twenties due to media influence and dive into the bar/club scene. Still others hole up at home out of uncertainty and introversion.
The thing all of those people should be doing is to think about the things they’re most passionate about and interested in, find outlets for those things in their community, and get involved with them. This allows a person to start building social relationships based on actual common interests.
I didn’t do this particularly well after college. I mostly wound up going out for drinks a lot with people I didn’t have a whole ton in common with and then otherwise holing up at home doing the same things I did in college. It took me several years to really figure out the things I was interested in and passionate about and then go out into the community to find groups and communities that matched those interests.
If you live in a smaller city or town, you have to start with the options available to you. Start looking at Meetup, the city website, the local library, local newspapers, and so on to find out see what’s going on around you and dig into the ones that seem the most exciting to you.
In large cities, there are often meetups and events for everything you might be interested in, so start by thinking about the things you’re interested in and passionate about and then use those things to instantly filter the options available in your community using those same tools listed above.
The goal here is to find outlets for the things you find most meaningful and to meet people who also find those things meaningful.
Do something in the community or in those social scenes most nights (after dinner, of course) and on weekends. This is the recipe for building meaningful friendships and relationships as an adult, as far as I can tell. Without the social structure of school or college around you, it is rather tough to build friends that are more than just professional colleagues. You simply don’t have the structure around you that makes it easy to make friendships, so you have to make that structure a part of your life.
This means that, once you start finding those groups that are associated with meaningful things in your life, you dive into those groups and fill your social life with them, building friendships in all of those different groups and spheres.
Again, I didn’t do this until much later after college. I invested my social time into the bar/club scene, which never really clicked with me but felt like the thing I should do, and balanced that with solitaire hobbies at home. This left me, about five years after college, with one meaningful friend (besides my wife) in the area.
After switching over to following this recipe, I now have more friends in my life with overlapping interests than I’ve basically ever had, even when I was in school. I’ve had dinner parties that overflow the reasonable capacity of my home and I’ve had to cut lots of friends from the list just to make it even work. To compare that to where I was a few years after college is unbelievable, and the recipe was to figure out my interests, get involved in the community in line with those interests, and build friendships there.
Live with roommates while still single (or even when you’re not). Cohabitation is the key to keeping costs low early in your career. If you have a roommate, your costs for rent and utilities are halved. If you have two roommates, it’s cut by two thirds. It’s as simple as that. The financial benefits are enormous.
If you take the money you’re saving from this and channel it toward student loan debt, car loan debt, saving to buy your own home, or simply getting by while also being able to contribute to retirement, you are building a huge financial advantage for yourself.
Even better: if you can, buy a home for yourself and rent out part of it. That way, the rent income from other tenants in the house goes toward the mortgage, effectively enabling you to start building equity in the house much quicker. The renter is effectively paying a large portion of the mortgage interest.
Borrow items instead of buying them. There is a temptation when you have at least some regular income to simply buy things you need or strongly want. “This is something that is highly useful right now. I’ll go to the store or to Amazon and just buy it.”
That’s a bad routine to get into. Rather, think of such situations this way: “This is something that is highly useful right now, but will I really use it again with any frequency after I use it once? If I’m not absolutely certain of it, maybe I can just borrow it for this one use. I can always buy it later if it turns out that it’s a repeat-use item. Where can I borrow this from?”
Check out books and movies from the library. Borrow tools from a neighbor or a friend. See if your local parks and rec department rents or loans out sporting goods or camping equipment.
If you do have to buy something, look for it secondhand first. You can always invest in a top-of-the-line model as a replacement if you come to realize that you use this all the time, but you usually don’t know if you will or not and thus investing a lot of money into that initial purchase is a bad financial move.
Let go of the need to “impress” others by buying expensive stuff and name brands. Stop caring what other people think. All you need to do is present yourself reasonably well to the world – clean, not dressed in rags – and you’ll avoid 99% of negative impressions. Furthermore, the things you buy very, very rarely result in positive impressions. What usually does is friendliness and good conversation and good character. No one is going to become a great friend to you because of your car or your gadgets or your clothes. You might get a glance from someone, but it’s absolutely silly to chase a glance with huge sums of money. (The exception to this is professional situations where you’re trying to exploit that glance, such as being a salesperson.)
Practice good hygiene. Wear decent clothes that aren’t worn out. Keep yourself in good shape. If you do that and couple it with being reasonably personable, that’s really all you need.
I spent so much money trying to impress people after college, thinking this would win me relationships and social cache. It was a complete and total waste of money. I built relationships and social cache by having shared interests with people and being friendly and helpful.
Buy store brand toiletries, food staples, and basic items. Almost all of the “staples” you buy for your home and kitchen should be store brand items, and you should only move up from there if there is a clear reason why a store brand item isn’t getting the job done for you.
Buy store brand hand soap and dishwashing soap and sunscreen and laundry detergent and hand sanitizer and trash bags and so on. Buy store brand flour and sugar and cereal and milk and eggs and so on. Most of those items are functionally identical to the name brand, and in the cases where there are differences, you’ll scarcely notice. It’s just a guaranteed way to save.
Get in the store brand routine and stick with it.
Establish a firm daily exercise routine. This serves a ton of different purposes in your life.
First, exercise has enormous long term health benefits. If daily exercise is part of your life, you’re delaying and avoiding tons of health care costs and pain in your life.
Second, an exercise routine is an easy way to feel better. You simply have more energy. Your body is healthier and feels better and probably looks better (especially if you exercise daily over a long period of time). You feel proud of your exercising efforts.
Third, it’s an extremely low cost hobby to have. It costs nothing to identify a good stretching and bodyweight routine you can do at home. Try doing the Darebee Workout of the Day and couple that with a good stretching routine and some walking and bicycling. It’ll cost you nothing and really help.
Obviously, exercise can be expensive if you join a gym or start an exercise class, but start off trying those things and see how it goes.
Gradually move toward “dressing well” by harvesting the best of Goodwill and secondhand shops. I invested a ton of money in clothes when I first entered professional life. What I really should have done is bought a very small set of high quality clothes that mixed and matched well and then spent time finding high-quality items at secondhand stores to add to that roster.
Don’t know how to do this? Check out Project 333, which is a challenge to live with a 33 item wardrobe for 3 months. The site gives tons of tactics and principles for doing this that work really well, and then you can keep going with them.
Finding high quality items in secondhand stores is surprisingly easy if you’re willing to dig through a lot of lower quality items to find diamonds in the rough. I often find basically new clothes in secondhand stores for a tiny fraction of their price – well made stuff that will last and last and last.
Avoid buying a car until absolutely needed and use mass transit as much as possible. You may already have a car, and that’s great. If you do, keep driving it until it’s ready to fall apart before moving to a new one.
If you don’t have a car, make it your goal to rely on your feet, your bicycle, electric scooters, and mass transit until you absolutely have to switch away from that.
Cars come with tons of minor costs that are overlooked. You have the car payments. You have the fuel costs. You have the maintenance costs – oil changes and so on. You have insurance. You have repair costs. You have registration costs. You have parking costs. All of that, and your car still depreciates rapidly.
If you can possibly avoid that money trap, do so.
Build an emergency fund. An emergency fund is simply a pool of cash you have in a savings account that you can tap in an emergency, like a job loss or a car accident or a medical issue or urgent travel or something like that. I usually encourage people to have at least a month’s worth of living expenses in an emergency fund, and not to rely on a credit card for emergencies because a fair number of emergencies take away your credit cards (like identity theft or natural disasters).
The easiest way to build this – and it’s something I recommend everyone do the second they have a decent-paying job – is to set up an automatic transfer from their checking to their savings account that scoops a small amount of money from checking every week and puts it in savings. Make it $20 a week or $50 a week. After a year, that adds up to $1,000 or $2,500.
Then, only use that money in a true emergency. Leave the transfer running forever – never turn it off. After a few years, you’ll always have emergency funds to tap, and that means that a sudden job loss or another emergency doesn’t instantly mean financial apocalypse or massive credit card debt in your life.
Pay off all credit cards in full each month. If at all possible, avoid carrying any sort of credit card balance from month to month. You may have to do this a little if you’re paying down pre-existing credit card debt, but if you have that, you should be paying it down as fast as humanly possible and that should be your main financial priority (after saving for retirement and putting a bit in your emergency fund).
The purpose of all of the other advice in this article is to enable you to have the available funds to both pay off credit cards (and keep them paid off) while having an enjoyable life in your twenties. If you’re struggling to be able to get rid of credit card debt at this point, it’s a sign of some kind of overspending or else you’re living in a high cost of living area with a low income job. If it’s the former, look carefully at every dime you’re spending. If it’s the latter, find a lower cost area to live.
Aggressively pay off student loans. If you’re contributing to retirement, trickling money into an emergency fund, and have no credit card debt, start aggressively paying off your student loans. Make double payments or triple payments if you can. Get that weight off from around your neck.
The faster you pay off a loan like this, the less total interest you’ll pay over the loan’s lifetime, the faster you’ll reach a point where it’s paid off and you have fewer monthly bills that need to be covered. The faster you get to such a situation, the better.
The same is true for any other loans you have, like car loans. Get rid of them as quickly as you can, and then the world becomes your oyster.
Don’t rush to get married and have kids. My final point of advice is simply a practical one: there’s no rush to get married or to have children, even if you want to. In fact, there’s some real advantages to waiting.
The reality is that marriage takes a real time investment to keep it strong, and children take even more. Children require a huge financial commitment, too, and although marriages can definitely help with expenses in some ways, there are also often expenses that come along with marriage (like a wedding, for example).
In your twenties, there’s a ton of value in getting rid of debts and getting a lot of money into your retirement accounts where it’ll have 30-40 years to grow with the power of compound interest. There’s also a lot of value in devoting plenty of time and energy to building adult friendships and relationships, establishing your career, and building your skills. Marriage and especially parenthood take away from all of those things. Plus, the more time you give to ensuring that you’ve found the right person means that it’s more likely that your relationship will really last.
I’m not saying that one should never get married or never have kids. I’m simply saying there’s no rush and there are many benefits to waiting until you’re in your thirties to take those steps.
I truly wish I had followed this template in my twenties. I made so many financial and personal and professional missteps in the years after college that they overshadowed the things I did right.
I don’t look back with regret. The mistakes led me to the life I have right now, and I’m happy with that life. I just know that I got fairly lucky to get to where I am, and I also know that making these good choices in my twenties would have increased the odds of winding up in a good life right now.
That’s really what these strategies are all about: they’re about increasing the odds of having a great life throughout the rest of your entire life without sacrificing the fun and freedom that comes with being a young professional. The way to that fun and freedom doesn’t come from opening your wallet, though so much of the media and social pressure can make it feel that way at times. Find your own path without spending money on forgotten things. You will never regret it.