Frugal Advice For New College Graduates
May always makes me nostalgic for the day nine years ago when Mr. Frugalwoods and I graduated, hand-in-hand, from college. Ahh, we were young, in love, jobless, broke (though without debt), and blissfully happy. We were reminiscing about our early post-college days this weekend and it inspired me to share all the stuff that I wish I’d known when we graduated. I won’t say it’s the stuff I wish someone had told me, because someone probably did and I probably just didn’t listen…
I’ve divided my advice here into two segments: before job and after job. Yes, this is an early retirement blog and yes, Mr. FW and I plan to quit our 9-5’s and retire early to a homestead in the woods. But, we wouldn’t be able to even imagine that future if we hadn’t both gotten jobs right after college, worked our butts off, and saved a ton of money. In other words, you’ll need to get a job before you can quit it.
By “job”in this context, I’m referring to what you’d consider a full-time, professional, likely salaried position in the field you’d like to be working in. For all intents and purposes, a “real” job.
Get A Job–Any Job–Immediately After Graduation
I’m supremely grateful that this is advice Mr. FW and I did take. When we first graduated, summer seemed like this time of endless revelry during which we could leisurely job search while hanging out with our friends for our final post-college hurrah. Yes, we did hang out with our friends a lot that summer, which I absolutely don’t regret, but, we also both worked full-time.
Mr. FW had already netted a “real” job, so he was off equipped with a tie and travel coffee mug every morning. I, on the other hand, had yet to land a job in my field despite having sent out upwards of fifty resumes. So, I trotted over to the temp agency and found a position at a document scanning company. Lest you think that sounds too exciting, let me assure you–it was the very definition of a menial job. I sat in a windowless room (thankfully along with a bunch of co-workers so I wasn’t lonely) and prepared documents to be scanned.
What does this entail you might be wondering? It entails straightening the edges of paper, removing staples and paper clips, and neatly stacking the pages back in order. Then, I carried my straightened file over to the scanning machine. I didn’t even get to feed the documents into the scanner–that was a job reserved for a more senior employee. Best part? I did this for 40 hours a week, Monday through Friday, all summer long.
But there were plenty of upsides–for starters, the hours were 7am-3pm, which gave me several hours every afternoon to conduct phone interviews and submit resumes. Plus, I was allowed to listen to NPR and the BBC all day long on my headphones and let me tell you what, I’ve never been more informed about world news. I honestly got smarter while doing that asinine job.
I had to humble myself a bit to take this job. After all, I had a college degree (which makes me laugh now), but at the time I was a bit ashamed that this was all I could get hired to do. But, I’m glad I did it. The job paid well and I saved money all summer long. Plus, I learned that it’s totally possible for me to do a job that’s inanely boring. Sure, I have a few college degrees and sure, I think I’m smart, but your know what? If I ever needed to, I could do that job again. It’s empowering to realize you can find self-sufficiency in surprising places. And I certainly didn’t feel ashamed when I deposited that paycheck every week–I felt shrewd.
So while you’re searching for your dream job, don’t waste time, earn money.
Consider Moving Back In With Your Parents
Neither Mr. FW nor I ended up doing this, but, I think it has the potential to be a great option. If you’re on good terms with your parents, and they’re OK with you trekking back into the family home, you can take this opportunity to seriously save money. Especially if you have yet to snare a job in your field, living with your folks (or other family members) can be an excellent idea while you continue job searching and also working your temp agency/Starbucks/nanny job.
And if you happen to find a “real” job in the same town as your parents, see if they’d be amenable to hosting you. Even if you pay them room and board (which I happen to think you should), I bet they’ll charge you under market rate. Plus, you won’t need to buy furniture or pay utilities. The key here is that if you go this route, you should be saving pretty much every dollar you make. Living on the cheap is not a license to go out every night and blow your salary. Take advantage of the situation in a positive way and set yourself up for financial success early on.
Don’t Go To Grad School Just Because You Can’t Find A Job
Mr. Frugalwoods dodged a bullet (in our opinion) on this front. He’d applied and been accepted into law school and was seriously considering going mainly because he wasn’t sure what else to do. He didn’t have a great dream to become a lawyer, he was just good at the logic questions on the LSAT and, let’s be honest, he kind of enjoys debating (good thing his wife did debate in high school too…). Fortunately, he was also offered a job at about the same time and, not feeling any great affinity for the law, took the job.
All I can say is thank goodness. Had he gone to law school, we’d probably be in some serious debt right now and, by our calculations, his salary would probably be about the same. And, from our conversations with our friends who are lawyers, he’d likely also be miserable in his job. This is in no way to malign lawyers–merely to point out that this would not be the ideal profession for my non-conformist, bearded Mr. FW.
The only reason he seriously considered law school is that is seemed like an easy next step after college. After all, he was good at school and this was just more school. We have a number of friends who went the route of grad school immediately after undergrad and, except in a few rare instances, most of them now say they regret it. In addition to incurring fairly massive loans, they feel trapped into careers they’re not necessarily passionate about. And thanks to those loans, they’ve got to keep working in order to pay them off.
I have no beef with grad school, but I highly recommend waiting a few years unless you’re absolutely, beyond a shadow of a doubt certain that you’ve found your lifelong calling. I went to grad school after working for five years, which gave me a pretty solid base of experience in selecting my degree program.
Additionally, and this is where it really counts: I first got a job at a university in order to take advantage of tuition remission. Here is a wonderful yet little-known fact: if you’re employed full-time at a university, most offer their employees free undergraduate and graduate tuition for the employee, their partners, and their dependents. The catch is that the federal government taxes graduate tuition as income (though not undergraduate tuition) and so I did have to pay the tax value. But, this was an absolutely nominal fraction of the sticker price of my degree. And so, I emerged from grad school entirely debt-free. Plus, since I’d worked all through grad school, I didn’t have any gaps in my resume.
All that to say, don’t rush into graduate school just because you’re not sure what to do after college. It’s not a waiting room or a playpen. The coursework is challenging, it’s time-consuming, and it’s freaking expensive. Don’t saddle yourself with lifelong debt just because you’re casting about for a career path. It’s far easier to take a job and see how you like it (plus, they’ll pay you for the privilege).
Adulthood Doesn’t Need To Happen All at Once
This is an error I made in my thinking post-college. I was so anxious to be a real, live grown-up that I wanted it to happen all at once. Mr. FW jokes that if I’d had my way, we would’ve graduated college, gotten married, bought a house and a car, and gotten pregnant all in the same month. He’s kind of right. Thank goodness a cooler head prevailed (his) and we waited before doing any of those things. At 22, I just didn’t have the perspective to see how young I was and how much time I had to navigate all of those milestones.
Sure, you might do all of those things immediately and it might all work out perfectly. But, don’t rush it. You have years to bring your dreams to fruition and time will give you maturity, insight, and certainty about your choices.
While Mr. FW and I did end up marrying each other just two years later at 24 (which sounds super young to me now…), I’m honestly glad we waited. We gave ourselves the opportunity to be adults together without the pressure of already being married. We lived apart and we took time to figure out what it meant for us to be in the “real world.” Then, after gaining that perspective, I felt entirely confident in my decision to say “I do.”
I was way too hard on myself right after graduation. I wanted my future adult life to fall into place immediately and I felt like a bit of a failure living with four roommates and tromping off to my temp agency job every day. But in hindsight, I’m tremendously grateful for that formative experience.
So don’t pull a Mrs. FW and panic if your ideal vision isn’t playing out right away. Instead, be like the zen Mr. FW and enjoy this phase of life for what it often is: confusing, bizarre, and uncharted. Trust me, you’ll look back on it with fondness.
Consider The Commute
When job hunting, be wary of locking yourself into a lengthy commute. When living near campus during college, a “commute” was a theoretical thing for me and Mr. FW. We walked just a few minutes to class and then a few more minutes to get downtown to the
bars libraries or we biked around town. So when Mr. FW took his first job, he thought nothing of the 45 minute drive each way. It only took him three months of driving an hour and a half every day before he decided to move to an apartment 5 minutes away from his job.
A long commute eats both hours of your life as well as a good percentage of your paycheck. Mr. FW and I strategically chose the location of our current home to enable short commutes for us both. Thanks to this, Mr. FW is able to bike to work all year long (yes, even through the Boston winter) and I have a very short drive. We typically get by on just one tank of gas per month and are able to share one car. In sum, long commutes are both expensive and dumb.
Be Geographically Flexible In Your Job Search
As I bopped along at my document scanning gig the summer after graduation, I was also sending resumes out like mad. I think I applied for 50 or 60 jobs all across the country. I was willing to move just about anywhere in order to get a good job with the potential for promotion, a career path, and upward mobility. Being flexible in your job search opens up thousands of positions and gives you the opportunity to leverage the best offers.
Plus, it lends a sense of adventure to life. Once you’re actually an adult with a spouse and kids and a mortgage, your options for picking up and moving across the country are significantly more limited. I moved to New York City for my first job having never been there before. I took a plunge and I’m glad I did. It was a fascinating experience and I’m happy that I took advantage of that flexibility in my life to try something new.
Don’t Inflate Your Lifestyle
Congrats, you’re gainfully employed! But don’t take that as a license to start spending like a maniac. Just because you’re earning $30,000 per year doesn’t mean you should be spending $30,000 per year. Remember, you lived just fine on the cheap throughout college (or at least I sure hope you did), so don’t start treating yo’self right and left now that you’ve got a job. Mr. FW and I were fortunate enough to leave undergrad with no debt and we didn’t want to start incurring any as young adults.
You may think you want to work for the rest of your life and not consider early retirement, and that’s totally fine. But, living paycheck-to-paycheck will absolutely ensure that you’re never able to quit your job, no matter how badly you might want to.
And as the universe gives, it also takes away. Just because you have a job now doesn’t mean you’re guaranteed employment forever–your company could downsize, you could have a medical crisis that forces you to quit, or you could find your job less than stimulating after a few years. Saving a hefty percentage of your paycheck every month ensures that you have options. When you have a healthy savings, losing a job is an inconvenience, not a crisis.
Sign Up For Your 401(k) or 403(b) IMMEDIATELY
This is the only item on this list that I’d say is mandatory :). No joke, people. If you contribute to a 401(k) (or a 403(b) if you work for a nonprofit) for just the first 10 years of your employment–say from age 23 to age 33, you’ll have more money when you’re 65 than if you start contributing at age 31 and contribute for a whopping 34 years. Now that is some action you want in on.
So what’s a 401(k) and how the heck does it accrue money? Check out Mr. FW’s post all about it and the magical unicorn of compounding interest: 401ks Are Your Friend: Demystifying Personal Finance Part 3.
Sign up for your 401(k) on your first day of work and contribute at least enough every month to receive the match that your employer offers. Your older self will thank you with a comfortable retirement.
Buy Your Work Clothes From A Thrift Store
Yes, you will need to look professional at your new j-o-b, but no, you do not under any circumstances need to rush out and shopping spree a new wardrobe. Hit up the thrift store for a set of classic, basic items that you can rotate week to week. My favorite professional item to buy used is a dress–it’s a whole outfit in one! Throw a blazer or cardigan over the top and you’re set for year-round professional wear.
Menfolk–you can find button-down shirts and slacks used as well. We have found that there are typically fewer men’s items in thrift stores and so we’ve had to resort to buying new for Mr. FW far more often than me (ladies, no excuses!). For buying new on the cheap, check out Kohl’s, Costco, Wal-Mart, and the Gap clearance rack (we found $8 pants there for Mr. FW!).
For tips on how to thrift with the best of them, check out When to Thrift: Chic on the Cheap. And, for the stuff you can’t thrift (I’m looking at you, socks and underwear), there’s When Not to Thrift: New Clothes on a Budget.
Come To Think Of It, Buy Everything Else Used Too
The temptation to fling your newfound salary at all sorts of new gadgets may be alluring, but resist and desist! Buying used furniture, cars, clothes, and housewares will save you gigantic amounts of money. Mr. FW and I furnished our entire home via Craigslist and spent a modicum of what we would’ve had we bought new.
Plus, when you buy used, you’re able to afford higher quality items than if you buy new. For example, our dining room table is solid wood that was crafted in Scandinavia and we got it used (plus four chairs) for $75. That’s cheaper than the cheapest, crappy Ikea table on the market. You’ll fare much better by shopping used. If you want to master the used market, might I suggest 12 Ways to Get a Steal on Craigslist.
Start An Emergency Fund
Now that you’re a real adult you could have real emergencies, so best to start an emergency fund. What’s an emergency fund? It’s basically just a savings account that you don’t touch except in cases of actual emergencies–like a job loss, a health crisis, or some other true emergency situation.
Common wisdom states that an emergency fund equates to 3-6 months of living expenses, which is a pretty reasonable amount. I’d err on the side of caution and aim for closer to 6 months, but 3 months is a start. This is not an “emergency pay-a-bar-tab fund.” And if you do need to tap into the fund for a true emergency, prioritize replenishing it with your next paycheck. For more, check out Unicorns, Soviets, and Compound Interest: Demystifying Personal Finance Part 1.
Transitioning from college to the working world doesn’t have to be a stressful, fraught experience. It’s a unique chance to basically start a whole new life and create the future that you want to live. Setting yourself on a fiscally responsible path early in your adult life will yield countless dividends later. Take this opportunity to start life right. And remember: frugality gives you options. Debt, on the other hand, only serves to restrain you.
What advice would you give to a recent college graduate? What do you wish you’d known?
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