Money 101 for new college graduates
NEW YORK, May 15 - This was originally published in the On The Money newsletter, where we share U.S. personal finance tips and insights every other week. Sign up here to receive it for free.
My social media feeds are filled with Class of 2025 college graduation photos, so I figured this would be a good time to offer up a few key money tips for new grads who are just entering the workforce.
Shikha Narula, who is head of consumer and small business product strategy, transformation and rewards at Bank of America (yes, that is her actual title!), suggests new grads follow a 50/30/20 budget, opens new tab.
Here is how it works: 50% of your earnings should be used to cover 'needs' – basic essentials like rent, student and credit card debt along with car payments.
Put 30% of your paycheck into the 'wants' bucket to cover things you would like but don't necessarily need, such as travel and dining out.
And the remaining 20% should be set aside for savings and investments – this money can be used for buying a home or retirement.
In addition, start directing money into a separate emergency fund, which can tide you over during a layoff or another major financial disruption. It may take a while to build up an emergency fund to cover one year's worth of expenses, ideally. Your employer might even help.
'It is okay to build toward that. It won't happen right away,' Narula says.
The hardest part is to stay disciplined, particularly when it comes to socking away money.
'It's easy to ignore the savings component,' Narula says. Be sure to take advantage of employer-sponsored savings plans, such as a 401(k), opens new tab retirement plan and maximize any savings matches.
Student loans make up the second-highest form of household debt after mortgages, totaling more than$1.6 trillion, opens new tab. That works out to about $38,000 per borrower.
Indeed, paying off those loans can be a huge burden, which is why new grads should be sure to fully understand their loan requirements, interest rates and monthly payment dates.
If possible, automate your student loan payments, so you can set it and forget it.
This information is most helpful for anyone who has an income. But, incidentally, the top post-graduation fear among students is not finding a job (44%), followed by student loan debt (33%) and credit card debt (18%), according to a new study from WalletHub, opens new tab.
If you don't have a job yet, a budget is even more important! When you don't have money coming in and still have bills to pay, you need to obtain near-term funds at the lowest rate possible, Narula says.
'Prioritize student loans and credit card debt, and stay within your means,' she adds.
What other money advice do you have to share for recent college graduates? Write to me at
READ, WATCH AND LISTEN
Retailers rush to save US summer shopping season
I polluted the minds of 8,679 college graduates, opens new tab (WSJ)
Luxury sector faces more gloom as Bain cuts sales forecast
US SEC chair says agency plans to create new rules for crypto tokens
Amazon signs up FedEx for residential deliveries
These investors cashed in by holding firm when markets slumped, opens new tab (WSJ)
Trump vs. Ivy League nest eggs, university research and student access
Your summer travel guide for 2025, opens new tab (Washington Post)
Walmart warns of higher prices due to tariffs, holds off on second-quarter guidance
My friends and I are rethinking our spending because of economic anxiety, opens new tab (WSJ)
Summer could be about to get a lot more expensive, thanks to tariffs, opens new tab (Washington Post)
Market rally shows 'worst outcomes' off table
Remarrying in retirement? It can make money management tricky, opens new tab (NYT)
FIVE THINGS I LEARNED READING REUTERS THIS WEEK
A$K LAUREN
Are you trying to build an emergency fund? Do you need to find a financial adviser? Send your personal finance questions to
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
8 minutes ago
- Reuters
S&P Global 'positive' on Wells Fargo as regulatory burden lifts
June 6 (Reuters) - S&P Global (SPGI.N), opens new tab upgraded its outlook on Wells Fargo (WFC.N), opens new tab to "positive" from "stable", the ratings provider said on Friday, after the U.S. bank was released from a $1.95 trillion asset cap earlier this week. The U.S. Federal Reserve's unprecedented, seven-year long punitive measure was imposed on Wells in 2018 and restricted balance sheet growth so the bank could address rampant governance and compliance concerns that had been brought to light in a fake accounts scandal in 2016. The Fed's unanimous decision on Tuesday capped years of efforts by the bank to repair the damage and pay off billions of dollars in fines, sending Wells Fargo shares to a three-month high a day later. The stock has gained nearly 8.3% in a year where the benchmark S&P 500 (.SPX), opens new tab has remained flat. "The positive outlook on the holding company reflects our view that Wells Fargo has substantially improved its underlying governance, risk, and control profile, allowing for the removal of the Fed's asset cap," said S&P. S&P also expects Wells to expand its commercial and investment banking business, "the unit most affected by the asset cap and one that had to turn away some nonoperational deposits from customers." While the fourth-largest U.S. lender was forced to carefully manage wholesale deposits and its markets business, assets of peer JPMorgan Chase (JPM.N), opens new tab swelled by nearly $2 trillion since the start of 2018, while those of Bank of America (BAC.N), opens new tab and PNC Financial (PNC.N), opens new tab added about $1 trillion and nearly $200 billion, respectively.
Telegraph
14 minutes ago
- Telegraph
Trump vs Musk is the final battle before economic catastrophe
Who needs reality TV when there's the psychodrama of Trump's White House to keep us all entertained? As plot lines go, the falling out between Elon Musk and Donald Trump was perhaps about as predictable as they come, but the sheer venom, speed and combustibility of the divorce has nevertheless proved utterly captivating. Even the best of Hollywood scriptwriters would have struggled to do better. The stench of betrayal hangs heavy in the air, a veritable revenger's tragedy of a drama. Beneath it all, however, lies a rather more serious matter than the sight of two of the world's richest and most powerful men breaking up and exchanging insults. And it's one which afflicts nearly all major, high income economies. Slowly but surely – and at varying speeds – they are all going bust. Yet few of them even seem capable of recognising it, let alone doing anything to correct it. None more so than the United States, where the Congressional Budget Office last week estimated that Trump's 'one big, beautiful bill' would add a further $2.4 trillion to the national debt by 2034. Let's not take sides, but Musk was absolutely right when he described the bill as 'a disgusting abomination'. It taxes far too little, and it spends far too much. It is hard to imagine a more reckless piece of make-believe. Musk had backed Trump not just out of self-interest – more government contracts, protection of the electric vehicle mandate, personal aggrandisement and so on – but because he genuinely believed he could help stop the US from bankrupting itself. This has proved a monumental conceit. The $2 trillion of savings in federal spending he initially promised has turned out to be at most $200bn, and probably substantially less once double accounting and wishful thinking is factored in. In any case, against total federal spending last year of nearly £7 trillion, it is but a drop in the ocean, and only goes to show just how difficult it is to find serious savings in government administration even when given a free hand with the headcount.
Reuters
22 minutes ago
- Reuters
Breakingviews - Elon Musk picks a losing fight with Donald Trump
NEW YORK, June 6 (Reuters Breakingviews) - Money can buy power, but Elon Musk paid for someone else to have it. After spending more than $250 million backing Donald Trump's presidential campaign, an acrimonious schism erupted between the two and swiftly vaporized $150 billion of Tesla's (TSLA.O), opens new tab market value. By picking a losing fight, the carmaker's boss is putting even more at risk for himself and his investors. A cozy alliance between the world's richest man and its most powerful one pointed to a troubling oligarchy. Musk joined Team Trump to lead a controversial effort to slash costs from the U.S. bureaucracy. Tesla sales sank internationally, protests at showrooms escalated and concerns about the CEO's focus intensified. He left his Department of Government Efficiency post last week, with an amicable White House sendoff. The tone abruptly changed on Thursday. Musk's criticism of Trump's signature budget legislation and the president's retorts about government contracts with Musk's companies spiraled into a deeply personal social-media war of words. Musk is a formidable force, with a net worth approaching $400 billion, according, opens new tab to Forbes. His rocket company SpaceX accounted for 85% of orbit-bound cargo in early 2024 by one estimate. After paying $44 billion to buy Twitter, he remade it into a friendlier forum for the president's followers. Any tinkering with the algorithms might swing the tone, as could Musk's bulging wallet if used to support anti-Trump candidates. A threat, opens new tab from Trump to cut U.S. government purse strings from Musk's businesses flaunts the real balance of power, however. About $22 billion of contracts hang in the balance at SpaceX alone, Reuters reported. Tesla's deep ties in China, where it generated a fifth of revenue last year, also may tempt the president's ire as he wages a highly combative trade war with Beijing. Reprisals from President Xi Jinping also could be painful. Musk is doing his companies no favors either. He pivoted Tesla away from mass-market dominance to pursue autonomous driving instead. National regulators have nagging questions about robotic taxi services. A more hostile regulatory environment would undermine the moonshot, leaving a shrinking car business falling behind Chinese rivals. If Musk doesn't back down, as he hinted was a possibility, the costs are bound to escalate. Having already alienated pro-renewable-energy Democrats, he may scare off pro-Trump Republicans, too. An adversarial relationship with SpaceX is probably untenable for NASA. Raising money for his artificial intelligence venture may get harder, as would securing U.S. government contracts for his tunneling company. Musk achieved success by defying perceived scientific constraints, but he is now pushing up against the limits of money. Follow Jonathan Guilford on X, opens new tab and Linkedin, opens new tab.
