Why should we be talking about good money habits even though you’re still in school? Because the time to learn them is before you need to. Good money habits are like goods nutritional and fitness habits – the earlier in life you learn them and put them into practice, the greater the benefits.
Small changes in habits, implemented early in life, have a way of paying ever-larger dividends for the rest of your life. University students often think of these as being one of those practices in life that can be put off until later. The problem with later – as in after graduation – is that you’ll be hit by a storm of changes that will make it more difficult to implement productive habits.
Not only will you be transitioning from university to the workplace, but you’ll suddenly find yourself surrounded by people who are not students (i.e., your co-workers), you’ll be earning money instead of grades, and you may even make a geographic change. It’ll be a lot to digest so it’s best to learn good money habits before it all starts.
What are good money habits for new graduates?
1. Always live at least a little beneath your meansIf there’s one piece of advice that has the most universal application it’s this one. Having money to save and invest is probably the most fundamental aspect of financial success. Unless you’ll be inheriting a substantial amount of money, the only way you’ll be able to get there will be to live beneath your means and save and invest the difference.
At a minimum, you should be prepared to save and invest at least 10% of your after-tax income. That will mean that you will have that much less to spend, but it’s best to get used to that as soon as possible.
The higher the percentage of after-tax income that you can devote saving and investing, the sooner you will reach any and all financial goals you may set for yourself. The key to doing that will be to learn to do without – to spend less than you earn. As a university student living on a shoestring, this is a concept you’re probably already familiar with. This is also why it’s so important that you are prepared to adopt this habit immediately after graduation.
The last thing you want to do is to get comfortable living on 100% or more of your paycheck as soon as you start earning money. That will very quickly turn out to be a road to nowhere.
2. Always save money, even if it’s just a little bit
There are times in life when it seems to be virtually impossible to save any money. This can be especially true when you’re a new graduate looking to get started in life. There are clothes to buy, vacations to take, restaurants to eat in, a car to buy, and an apartment to furnish. That can leave little room for savings.
No matter how small the amount of savings is, plan to save at least a little. If that’s just $50 a week, than $50 will have to do it. But even that relatively small amount can add up. If you save that much each week for 52 weeks, in one year you’ll accumulate $2,600.
That may not seem like a lot of money but it is a start. That’s what good money habits are all about – getting started and following through on a consistent basis. If you are successful in developing that as a habit, small amounts of money will eventually turn in the larger amounts.
And when they do, you’ll be on your way.
3. Find ways to get what you need without going into debt
The need to set yourself up in life can be overwhelming. You need a lot of stuff and you need it in a short amount of time. Many new graduates are more than willing to take on debt in order to fast-forward the process. That can be a mistake, particularly if you already have a substantial amount of student loan debt.
Wherever possible, try to find ways to get what it is you need without going into debt. That might mean buying a secondhand car rather than a new one. It might mean going to thrift stores and garage sales to buy furniture for an apartment. It might also mean forgoing vacations and restaurant meals until you’re in a more solid place financially. If that’s the case, accept it and get comfortable with it.
Any debt that you can avoid will mean that more of your paycheck will be yours each month. That will allow you to save and invest more money, and eventually to even live better.
4. Never stop learning
Never assume that you “know it all” by virtue of the fact that you’re a university graduate. Always stay open to learning, particularly as it relates to your career field. Everything in the business world is changing, and changing quickly. In order to stay on top of it, and to remain competitive, you’ll have to think of yourself as a sponge ready to soak up new ideas and techniques as they develop.
Plan on taking courses, reading books and taking home study programs related to your career. Wherever possible, try to stay ahead of the curve and trends in your field. That will not only keep you out of the unemployment line, but it can also keep you open to rich promotions and lucrative new positions. A little bit of time and money invested here can return many times the cost.
5. Be careful in choosing your friends
You may not think of friends and money as being related but they are. If you are running with a crowd who like to live well – “well” as in beyond their means – you will have to consider the possibility that you might be sucked into the same lifestyle. You can easily drain yourself financially simply by trying to keep up with your friends.
You’ve no doubt heard the well-worn advice to surround yourself with positive people. By doing so, you’re more likely to become a positive person yourself with all the benefits that brings. The same is true when it comes to finances. If you’re surrounded by spendthrifts, there is a very good chance that you’ll become one of them. If you do, you’ll likely end up broke and in debt.
This isn’t to say that you should choose your friends based strictly on their attitudes toward finances. But usually when we choose friends, there are a number of qualities that we consider. All things being equal, seek out those whose attitudes toward finances are consistent with your own. That will raise the chances you be able to achieve whatever financial goals you set for yourself.
You may still be in university, but now is the perfect time to begin developing good money habits. Build them now, and they will be with you for the rest of your life.