7 Smart Saving Strategies for New Grads

Photo (cc) by theevocater

I landed my first professional job right out of college way back in 1992. I was earning $18,000 a year and somehow managed to pay rent for a small apartment just off of Lake Shore Drive in Chicago, have a car, and dine out (maybe a bit too often) with friends.

I didn’t feel the least bit deprived at the time. In fact, I felt like I was making enough to not only stay on top of my bills, but save, and enjoy life too. I think what kept everything in balance was a basic knowledge of how to manage money and meticulously avoiding the more common missteps that might have capsized my little income boat.

No doubt there are throngs of new grads out there looking for or landing their first “real” job and wondering how to make ends meet and still save in an economy that can best be described as challenging. Here are seven strategies that can help:

1. Know where your dollars go

The foundation of all successful saving strategies is knowing where your money goes. Whether you track spending the old-fashioned way by filing receipts in a shoe box or through Web-based tools like Mint.com, understanding your spending habits is key to making the changes necessary to better serve your future.

Ask yourself: “Are there categories where my spending seems unbalanced or out of control? What are my spending triggers? What changes do I need to make in order to budget more effectively?”

Start by tracking your spending monthly; then, as your awareness and discipline grow, review expenditures quarterly to make sure you’re on track.

2. Attack debt

As much as our budgets will allow, debt shouldn’t be allowed to linger. Student loan debt, consumer debt, long-term auto debt and the like should be attacked with the full force of your paycheck (that means hacking away at the principal by paying more than the minimum due each month).

Otherwise, the slow bleed of principal and interest will drain the surplus that’s so essential to building net worth.

As extreme as it may sound, consider doubling down on your debt repayments by taking a part-time consulting or weekend job in addition to your regular 9-to-5. Direct 100 percent of that income to debt repayment (in addition to whatever you can afford from your primary job).

Though it may be painful for a while, this aggressive strategy will pay your debt down much faster, free you from wealth-sapping interest, and leave you free to fund your future.

3. Understand what money really is

Money is an abstraction. At its root, it simply represents our time in the form of labor. But truly grasping this concept and letting it inform your spending habits has profound and potentially behavior-shifting results.

Instead of equating that new $225 leather coat with money or credit card debt, link its value to your time and labor. Is it worth 10 hours of work? How much additional time and labor will it take to pay the interest if you charge it?

4. Start small; be steady

One of the most common misconceptions about saving is that we need to go big or go home. But amazing things have been done by regular people earning modest incomes and saving small amounts.

Over time, success is built upon discipline, consistency, and the power of time. Start saving early, don’t get discouraged by humble balances, and look for opportunities to invest more and ways to make what you’ve already saved work harder.

5. Go for the goal

Few things are achieved without a clear objective. And like any other type of goal, financial goals give structure to our efforts, motivate us, and help us measure success.

As you begin to save, establish short-term and long-term goals. Do you want to own your first home by 30? What kind of down payment will you need to make that happen? Do you need to pay off debt first? How much will it take to knock out your student loans in 10 years?

Make your objectives specific, attainable, and flexible enough to adapt as your income grows and your needs change.

6. Stash the cash

Funneling what you save into a separate account is sound strategy. It helps avoid the temptation to spend. Track interest and seize new investment opportunities, and monitor growth over time.

As enticing as it may be to deplete your blossoming savings account for short-term wants, keep this money off-limits and let it fund your long-range financial goals.

7. Watch your overhead

Finishing college, ending years of ramen-fueled deprivation, landing that first job, and setting up house can be a heady time of life. And amid that newfound freedom and regular paycheck, new grads can be tempted to overspend.

Once you secure that first job, don’t try to make up for lost time as a consumer. Avoid entering into long-term contracts, spending on big-ticket items, or adding unnecessary expenses to your permanent overhead. It takes time to adjust to a new income and understand exactly how far it will — or won’t — go.

If you’re a new grad or even a not-so-new grad, a few simple strategies can go a long way toward building security in uncertain financial times. Though it isn’t sexy or particularly headline-grabbing, the difference between financial success and failure in the long term isn’t necessarily how much money we make, but what we do with it, how we leverage it to increase our wealth, and how disciplined we are along the way.

What saving strategies have you passed along to the young adults in your life? What advice has helped you the most? Share your comments below or on our Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
5 Awesome Places You Can Retire Overseas on $2,000 a Month or Less
5 Awesome Places You Can Retire Overseas on $2,000 a Month or Less

In this week’s podcast: tips on retiring overseas — from someone who’s been helping American expats for decades.

10 Mistakes That Cost You Money at Warehouse Stores
10 Mistakes That Cost You Money at Warehouse Stores

Wholesale clubs might have great deals, but these mistakes will cost you.

19 Purchases That Buyers Almost Always Regret
19 Purchases That Buyers Almost Always Regret

Think twice before buying these things.

How to Fix 6 Common Retirement Mistakes
How to Fix 6 Common Retirement Mistakes

Here’s how to strengthen your nest egg before or even during your golden years so these missteps don’t ruin your retirement.

5 Tax Breaks That Retirees Often Overlook
5 Tax Breaks That Retirees Often Overlook

Did you realize all these tax credits and deductions exist — or that they apply to retirees?

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

11 Household Items That Go Bad — or Become Dangerous
11 Household Items That Go Bad — or Become Dangerous

When you get the impulse to stockpile these everyday items, pay close attention to their expiration dates.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

This Is the Cheapest Place to Buy a Used Car
This Is the Cheapest Place to Buy a Used Car

Looking for a good deal on a set of wheels? This should be your first stop.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

7 Surprising Features That Boost Your Home Value
7 Surprising Features That Boost Your Home Value

You can add value to your home without hiring a contractor to do expensive renovations.

15 Amazon Purchases That We Are Loving Right Now
15 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.