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5-step financial checklist for new college grads

Shelly  Gigante

Posted on June 01, 2023

Shelly Gigante specializes in personal finance issues. Her work has appeared in a variety of publications and news websites.
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Explain why good saving and spending habits may help you achieve your dreams, from buying a house to starting a business.

Describe the steps to building a budget, so there’s money leftover at the end of the month for things you value most.


Identify three red flags that you may be taking on too much debt, including borrowing money to make credit card payments.


New college graduates have much to learn about money management, from paying down loans, to living on a budget, to saving for future goals. And the faster they develop financial wellness habits, the better positioned they will be to capitalize on opportunities that come their way.

“It is very important to get your financial house in order from the get-go,” said Laura Schroeder, a financial professional with Lenox Advisors in Los Angeles, California. “We always hear our parents or colleagues in their 40s, 50s, and 60s saying, ‘I wish I would’ve.’ Don’t we all want to change that narrative for ourselves when we look back at age 22 and say ‘I’m glad I saved, invested, purchased real estate, insured myself, etc.?’”

Indeed, good saving and spending habits open the door to choice — enabling you to take a job with lower pay but better potential, pursue a higher degree, build wealth through homeownership, or realize your dream of becoming an entrepreneur.

The journey to financial freedom begins with a few simple steps:

Create a budget

Contrary to popular belief, a budget is not an instrument to restrict your fun. Rather, it helps ensure that there’s money left over at the end of each month to spend on things that matter to you.

“Budgeting is critical,” said Schroeder. “We lose so much money in what seems like smaller monthly dues such as streaming services, food delivery, ride share apps, and online shopping with extra shipping costs. It adds up.”

Creating a budget isn’t hard. Start by calculating your monthly net (after-tax) income so you know how much you have coming in. (Learn more: What does a budget mean and why is it important to have one?)

Next, make a list of your expenses, both necessary and discretionary.

  • Necessary expenses usually remain the same every month and include rent, utilities, groceries, and insurance.
  • Discretionary expenses fluctuate and include variable items like clothing purchases and dining out.

Many financial professionals recommend a 50/30/20 split, with half of your income going to essentials (typically your fixed expenses), 30 percent earmarked for discretionary spending (your variable expenses), and 20 percent saved for future needs, including retirement and an emergency fund.

We all need an emergency fund with at least 3 to 6 months’ worth of living expenses, a safety net from which to draw so that income interruptions and unexpected expenses don’t derail our financial goals. (Learn more: Don’t have an emergency fund? Get one)

The key to financial success is to “live below your means, save for a rainy day, and plan for the unexpected,” said Joseph Leary, a financial professional with MassMutual Greater Philadelphia.

Budget apps such as Mint, You Need a Budget, and PocketGuard can help you track your spending so you stay on course.

Managing your student loans

Paying down debt takes discipline, especially for young adults with many expenses and small starting salaries.

The average federal student loan debt is $37,574 per borrower, while private student loan debt averages nearly $55,000 per borrower, according to Education Data Initiative.1

To eliminate your student loan debt faster, try paying more than the monthly minimum towards the principal on your highest interest rate loan first — generally any private student loans you may have. Private loans typically have less flexible repayment terms than federal loans, which is further motivation to pay them off quickly.

You should also be strategic about repayment of your federal loans. It’s generally best to focus on your unsubsidized loans first, which start accruing interest immediately while you are still in school. By contrast, subsidized loans do not accrue interest until you graduate.

If eligible, it may help to refinance or consolidate your student loan to reduce your interest rate or the term, either of which can help you pay your debt down faster. (Related: Paying off student loan debt: 5 tips)

Just be sure you continue to save for other goals while you chip away at student loans. Waiting to put money away for retirement until after you pay off your student loans is a costly mistake that can jeopardize your future financial security.

Use credit cards responsibly

Not all debt is bad — some loans provide the leverage to help build wealth. For example, mortgages are tied to a potentially appreciating asset, while student loans may help to boost your lifetime earnings potential. (Learn more: Good debt versus bad debt)

But it’s all too easy to get in over your head with credit cards, many of which charge borrowers who carry a balance interest rates of 18 percent or more. For perspective, a $4,000 credit card bill will take you 20 years to pay off and cost you $5,423 in interest if you make only the minimum monthly payment on a card that charges 18 percent interest.2

Possible danger signs on debt include:

  • Missing payments.
  • Making only the minimum payments.
  • Borrowing money to pay your bills.

There are no hard and fast rules for the ideal amount of debt you should have. That will vary depending on your unique financial picture. But most lenders like to see a debt-to-income ratio of anywhere from 28 percent to 36 percent.

Pro tip: Handling debt responsibly has its rewards. By paying your monthly bills on time you help to boost your credit score, which makes it cheaper to borrow money down the road.

Start saving for retirement

Saving for retirement is technically part of “creating a budget,” but it’s important enough to emphasize independently.

The sooner you establish a discipline of saving, the bigger your potential returns will be. There is no substitute for the time value of money.

If you start saving $475 per month at age 22 your nest egg at age 67 will be nearly $2.4 million thanks to compounded growth. That assumes an 8 percent average annual return. By comparison, you would have less than half that amount ($1.1 million) if you wait until age 32 to start contributing the same amount monthly toward your retirement. (Learn more: Why saving for retirement early is important)

“I call if the snowball effect,” said Leary. “Get the ball rolling now and it just grows faster and faster. It’s the power of compounding,”

Most financial professionals recommend that working adults contribute between 10 percent and 15 percent of their income annually toward retirement.

If you can’t max out your 401(k) on year one, just save as much as you can — at least enough to get the employer match. And then, perhaps, make it a point to increase your contribution by 1 percent or more per year as bonuses or raises allow.

The most important point is to set up automated payroll deductions, so you pay yourself first. Saving for retirement doesn’t hurt if you never see the money in your paycheck.

Seek professional guidance

Good guidance from the get-go can potentially set you up for a lifetime of financial success. In fact, your 20s and 30s are the best time to establish a relationship with a financial professional who can help you create a roadmap to reach your financial goals.

A financial professional may be able to:

  • Guide you how much you should save for retirement.
  • Suggest a strategy for your taxable investments.
  • Review your insurance coverage to be sure that you and your loved ones are protected.
  • Help you stay on track during times of market volatility.

There are different types of financial professionals with a variety of credentials, specialties, and compensation structures.

It’s wise to interview several financial professionals until you find someone you feel is a fit. Be sure to check their license and ask questions about their qualifications, how they get paid, and what their investment philosophy is. (Find a financial professional.)


College grads have a bright future ahead. As they embark on their journey into adulthood, however, it is important that they stay focused on their financial well-being.

By living within their means, managing their debt responsibly, and setting money aside for future goals, they can put themselves on the path to personal fulfillment and financial wealth.

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1 Education Data Initiative, “Average Student Loan Debt,” Jan. 22, 2023.

2 Bankrate, “Minimum Payment Calculator.”

The information provided is not written or intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own and do not necessarily represent the views of Massachusetts Mutual Life Insurance Company.