Money

As a recent graduate, money is a constant thought on my mind.  But what does it actually mean to have money?  And how is your life any different now compared with undergrad?  How do you make the most of your money?  Let’s start in undergrad:

Senior Year

Hopefully you are reading this in time. 

Take a personal finance class and pay attention. 

You will thank me later.  I took a personal finance class my freshman year, and, unfortunately, I do not remember much.  A personal finance class will teach you the basics of investing, what a 401K is, and how to manage your money.  Unlike your sophomore year biology class that has no applicable value to a business major, the content in a personal finance class gives you tools to use for the rest of your life.

2 Weeks Prior to Starting your Job

Create a budget or sign up for a budgeting tool like mint.com.  You should know how much money you will be making, so get an understanding of where your money will go.  It will be surprising how much money goes towards taxes.  Be sure to allocate money to investments as well as to having fun.

First Day on the Job

This is an important day for your financial future.  You have the ability to sign up for your 401K contributions and your benefits.  These have monetary value for you, so take them seriously!  Understand if your company matches contributions to your 401K - if they do, be sure to contribute at least up to that match point.  If you do not fully contribute up to your company’s match amount, you are essentially accepting a smaller paycheck.  Ask another colleague with tenure at the company for help on this since they will have a better understanding of the benefits structure.

Morning of the First Paycheck

The money is finally rolling in!  Your hard work is paying off financially.  Now you can buy stuff.

Night of the First Paycheck

Go to the bar and spend all your money!  Just kidding, I do not advise this.  Now that you do have money, you have a responsibility to yourself and your money.  If you spend it all at the bar the first night, what happens the next two weeks while you’re waiting for your next paycheck?  While it is OK, and encouraged, to go out and have fun, it is important to do so in a fiscally responsible manner.  

Three Months Into Employment

Check your accounts and get an idea of how you are doing with your budget.  It is important to look back and see how you are tracking towards your goals.  If some area is not working for you financially, make an adjustment so it is more realistic for your life.

That is a short-term view of major touchpoints for your financial situation in Corporate America.  I would be remiss not to mention student loans when discussing money in context of recent graduates.  Personally, student loans have been a thorn in my side since graduation.  I have been slowly, but steadily, making a dent in them and am in a comfortable position to close out my loans in the near future.  So how do loans fit into the financial picture?  Well, obviously, you have a financial, and contractual, obligation to pay back your loans.  Take a look at how much you are making and how much your minimum required monthly payment is.  This will help educate you on how much you can or should pay.  I don’t think I would call it a mistake, necessarily, but one area I did not consider in paying back my student loans aggressively was the interest rate.  My interest rate was low and I was still paying off my loans well above the monthly minimum.  I did not take into account the fact that rather than paying off my loans so quickly with a low interest rate, I could invest the money that I was using to pay off more than the minimum payment, which would have given me a higher rate of return than my interest rate, all while paying off the minimum monthly payment.  Will this prolong the amount of time it takes me to pay off my loans?  Absolutely.  But the trade off in investing the money, to me, is worth it.  

Comparison to Undergrad

The common joke about undergrads is they have no money.  Which, to an extent, is accurate.  The jobs you receive are often low paying, hourly jobs, so income is not a major factor.  And you scrape by eating pasta for the majority of meals since it is so cheap.  But, you make your money work for what you want.  Undergrad students make money to pay off the monthly car bill, or go out to eat.  Some of them are able to even save money.

As a young professional in Corporate America, the money comes in more steadily than it did during undergrad.  But, what you do with the money does not shift all that much.  You apply it towards your necessities and interests, like paying off the monthly car bill or going out to eat.  You may have a bit more left over, which allows you to invest the money or go out to another nice meal each month.

Money is a vehicle.  And that vehicle allows you to do things that you want or need to do at all stages in life.

Thought Starters

  • What are you biggest financial concerns as you enter Corporate America?
  • How often do you check your budget to ensure you are on the right track financially?