comments
5 Things to Do Before You Start Working
Email
 Print
|
If you’re graduated in May (congrats!), I recommend reading David Griner’s post about five things he’d do if he were graduating in May. They contain five solid tips that can help you in your career.
If you haven’t yet joined the workforce but are planning to in the next few months, I wanted to give you five things you should do before you start working.
Learn to Budget
While you were in college, not budgeting was kind of OK. You didn’t earn a lot, you hopefully didn’t spend a lot, and so not having a budget was not as big of a deal. Now that you’ll be pulling in a larger paycheck and will likely be spending more money, it’s important that you learn how to budget.
Get A Credit Card
If you didn’t have a credit card in college, now might be a good time to start. Your credit history and credit score will be used in a whole host of unexpected places and will become more and more important as you get older. You probably won’t buy a house with cash, so your score and history will be important in determining your mortgage interest rate. The easiest way to build your credit history is with unsecured credit cards. It’s the easiest way to build credit, not the only way, but the easiest way.
Get A Credit Union Account
Credit unions are wonderful institutions. They are like banks but the “owners” are the credit union members themselves. This means that you’ll usually get higher interest rates on your savings accounts and lower interest rates on loans. Joining a credit union can also be very educational, many of them hold seminars teaching you basic financial ideas that can save you money down the road.
Understand Investing Basics
It’s important that you understand the basic concepts involved in investing, especially retirement investing. You probably won’t be investing directly in individual stocks on the stock market but you should be participating in your employer’s retirement programs, such as the 401(k). You’ll also probably want to open a Roth IRA if you’re eligible. Time is on your side and it’s important you arm yourself with knowledge so you can take advantage of your youth.
Read Foundation Posts
I’ve written several Foundation posts designed to explain the most basic personal finance concepts as comprehensively as possible. The How to Budget article linked to in the first tip is an example of one, as is the retirement investing article. We all need to start somewhere and I felt the Foundation series was a great way to explain personal finance for novices. If you have a topic you would like to see me cover, please let me know.
Those are my five, what things do you think new graduates should know as they enter the real world?
(Photo: wwworks)
{ 14 comments, please add your thoughts now! }Related Posts
 By Jim |
 Stumble It! Bookmark reddit.comTags: Budgeting, Credit Cards, Credit Union, Investing Jul 06, 2009 | Read more in Personal Finance |
Like this article? Get all the latest articles sent to your email for free every day. Enter your email address and click "Subscribe." Your email will only be used for this daily subscription and you can unsubscribe anytime.
Roths make great sense when someone is at the low end of their earning potential, as you’re paying taxes at the lowest rate, instead of paying future taxes at a higher rate. There is a lot of debate later on about which is better (I broke down some scenarios here -> http://www.observingcasually.com/roth-vs-401k/ ), but early in your career, Roth is a slam dunk.
Also, at the very least, you should take advantage of employer matching. If your employer matches contributions 1 for 1, this is an immediate 100% return on your money. This is an unbeatable return.
I don’t know that I necessarily agree that it was ok to not budget in college. If I had done a better job of keeping my spending in check I wouldn’t owe quite so much in student loans now. I had to pay my own way through school and while I wasn’t earning a fortune I wasn’t doing that bad either.
I think that it’s important to spend within your means. When I said it was OK not to budget in college, I meant it wasn’t as important to track every last penny and allocate each dollar. Spending within your means should be something you’re doing all the time, whether you track your spending or not.
That is true, unfortunately college is more about the party than keeping up with you spending
Well not in everyone’s case.
Jim, excellent idea posting this for beginners to the real world.
It’s amazing that a person can come out of four years of college, degree in hand, but not having had any training in personal finance. Personally, I think it’s a fundamental weakness of the education system. This topic is too important to be ignored within the curriculum, no matter what the major might be.
I think it’s more amazing that this knowledge isn’t taught in high school, where attendance is mandatory.
It’s actually really easy to finish four years of school and have little experience with personal finance because you don’t deal with much money, relative to later on in the real world, in college. I agree with you that it’s a weakness.
I was lucky enough to have been taught the above from my parents and saved my money, even during college. I know many of my friends though that wish they had learned these things before going into the real world.
I would agree with 4 of the 5 items. I would replace getting a credit card with creating and emergency fund. A verifiable job with steady income and a downpayment should be sufficient to get a mortgage. By definition a mortgage is a secured loan – secured by the property itself.
That’s a good 6th thing to do, emergency funds are crucial.
Understand that there is nothing wrong with living at home and using public transportation while you save up for a home down payment or pay down your debt. I’m a 4th year student and everyone is all excited about what new car they will pay or the downtown condo that they will rent.
In my opinion, the best approach if you are just starting out is to live on less than you make (allows for saving) and use a budget to plan spending. Avoid collection of extravent toys and the desire maintain the same lifestyle you had while you grew up. It is easy to forget sometimes that the life style your parents were able to provide (and that you have grown accustom to) was the result of their hard work and sacrafice over 20 or more years.
I agree that living below your means is the way to go when starting out on your own. Finances are tough enough to deal with without accumulating debt to top it all off.