This advice is part of an InvestorPlace series inviting academics from across the U.S. to share their thoughts on aspects of finance that new graduates should know. Their words have been presented with little to no editing. Today’s entry comes to us from Vicki Bogan, an associate professor for the Charles H. Dyson School of Applied Economics and Management at Cornell University, who spoke with InvestorPlace via email about financial advice for recent graduates.
As a Cornell finance professor and the Director of Cornell’s Institute for Behavioral and Household Finance, I often am asked to give finance workshops for students about to graduate.
From these seminars, I want to share two critical concepts that I encourage students to remember and implement when they enter the post-college world.
First, create a budget and understand all of your expenses.
When you are first starting out on your own, it is easy to lose control of your expenses. Eating out and impulse purchases can add up quickly and generate significant high interest rate credit card debt that becomes difficult to pay back.
If you start your post-college life with a budget and an understanding of all of your necessary expenses, you can avoid getting into financial trouble.
Second, develop strong savings habits.
Specifically, with regard to savings, it is important for new graduates to develop an emergency fund with at least 6-8 months of expenses. The economic downturn due to the coronavirus has highlighted the financial fragility of many households. These times underscore the importance having an emergency fund in case you lose your job, have health issues, or have unexpected expenses.
Creating an emergency fund can help you to weather difficult economic times.
You can read the next installment of “Money Moves for Recent Grads” here, and find the entire collection here.
