It’s graduation season again, that time of year when we send thousands of young people out into the world with freshly pressed diplomas. Graduation is an incredibly proud and exciting time, but it can also be nerve-wracking for the young people who are trying to figure life out. But there’s no need to be intimidated — the right advice can go a long way to help making the transition to adult life a successful one.

If you’re a new graduate — either from high school, college or other higher education — congratulations. You’ve accomplished a lot, and you should be proud of yourself. As you enter the world to begin working, earning money and building a life for yourself, the choices that you make right now can have ramifications on your financial life for years. Bad choices can trap you into patters that will keep you down, but good choices will set you up for success for years to come.

With that in mind, here are our six best pieces of financial advice for new graduates:

1) Set financial goals.

Once you get out of school and begin working full-time, you’re going to find yourself making more money than you ever have before. it can be really exciting to have all of that cash, and there’s no shortage of things that you probably want to spend it on. But before you start spending, it’s important to set some financial goals for your life so that you know you’re spending it in the right places.

Start with short term goals — what are the things that you want to do with your money over the next year or so? Move into your own place? Get some clothes that are appropriate for work? Next, consider your goals for the next five years. Will you need to replace a car? Is marriage in your future? Does it make sense to buy a house? Finally, look far into your future — children, retirement, etc. — and try to get at least a basic picture of what you would like those things to look like, so that you can begin building the financial foundations of that life.

2) Create a thorough budget.

Once you have outlined some goals for your financial life, you need to establish a plan for how you’re going to use your income to achieve those goals. That plan is called a budget, and it’s an absolutely essential tool to financial success.

A budget is a plan that tells you how you’re going to spend your money every month. It allows you to make savvy decisions about how much you’re going to allocate to short-term needs, how much you’re going to set aside for long-term goals, and how much you’re going to give. Budgets help us to keep our lifestyle spending in check, and sticking to a budget ensures that we’re making the most of the income that we have. If you don’t have a budget, you’re likely to find yourself at the end of each month wondering where all your money went. With a budget and a little bit of discipline, though, you’ll be amazed at how much you can accomplish.

3) Save some money for emergencies.

Emergencies are a regular part of life, even though we can’t predict exactly when they’re going to strike. When you were a child or a student, you probably relied on your parents to help you during financial emergencies. Now that you’re an independent adult, though, you don’t want to count on mom and dad to bail you out of the emergencies that are going to come up in your life. Instead, you need to have some emergency savings to get you through those times.

The amount of emergency savings that you need is going to depend a lot on your life circumstances. If you’re young, single and healthy, you probably only need a few thousand dollars. Save the money monthly, putting aside as much as you can afford each month until you’ve got a nice safety net. The only exception is if you have debt, in which case you should save up a small emergency fund and then work as hard as you can to…

4) Pay off your debt.

Unfortunately, the majority of students graduating college today are leaving with a significant amount of debt in the form of student loans. That debt often sticks around for years or even decades, and can really hold you back financially. Debt is financial slavery, so you should pay it off as quickly as you can in order to set yourself free.

If you have accumulated a lot of debt, paying it off may take a few years, especially since you’re not likely to have a large income right after graduation. But if you’ll really buckle down and commit to paying it off, you’ll save yourself thousands of dollars in interest over your lifetime, and free a significant chunk of your monthly income up for accomplishing other financial goals.

5) Watch your lifestyle.

Now that you have your own job and your own money, it can be tempting to run out and buy a lot of electronics, shoes or other luxury items. But as much as you may want those things, they’re probably not a good idea, at least not right now. If you have an entry-level income and some debt to pay, you need to live as cheaply as possible until you’ve straightened up your financial life, made strides toward meeting your goals and accumulated enough spare cash to buy some of the things you want.

On a related note, it’s important to be realistic about the kind of lifestyle you should expect to have as a young graduate. Many people make the mistake of thinking that they should  continue to have the same kind of lifestyle that they see their parents living. But when your parents fist started out, they didn’t have the income that they have now. They may drive nice cars and eat out frequently now, but they didn’t start out that way, and neither should you.

6) Create a habit of giving.

Giving is one of the best and most fulfilling things that we can do with our money, and I believe that it should be part of our financial plans no matter where we are in life. But giving doesn’t necessarily come naturally to everyone. That’s why it’s important to create a habit of giving early on in life, so that one day, when you have more money to work with, you’ll have developed a generous heart that is exited about giving a lot of it away.

Giving helps people and causes that really need money, and it also benefits you directly. Giving makes you a more open, friendly and attractive person, and it can open a lot of doors for you in life. And there are financial benefits to giving, too — God promises that if we are faithful to give, He will be faithful to bless us with more resources.

Those are our top six pieces of advice for new graduates — do you have anything to add? Jump into the comments section below and let us know!

——

Photo by Ralph Daily. Used under Creative Commons License.