The 7 Top Saving Hacks for New Grads

June 08, 2017

Do you know a new or upcoming grad? Last week, I wrote about why saving is such an important part of “adulting.” Of course, the hard part is actually finding the money to save. This week, I’ll share some key saving tips to pass on to any new grads wanting to start out on the right financial foot.

1. Don’t forget the cost of state income taxes when evaluating job opportunities. Taking a job in a state without a state income tax like Texas, Florida, Washington, or Nevada can save you thousands of dollars in taxes each year. Make sure you factor that in when comparing compensation and cost of living.

2. Keep your housing costs as low as possible. It may be tempting to get the best home you can afford, but this is where you can save the most bucks. Housing is a fixed cost that’s hard to adjust if money gets tight.

The key is to live below your means. Consider starting out living with parents or roommates for a while. In addition to saving on rent, you can also split utilities and share the cost of furniture and appliances. When your income goes up, upgrade to a studio before getting a one bedroom. By improving your living situation gradually, you can get a new “shot of happiness” with each improvement while being able to save more at each step.

In my case, I lived with roommates all the way up until last year. I actually preferred having the companionship of living with people that’s harder to find after college, especially if you move to a new area like I did. Even now, I live in a small studio that I was able to purchase in cash from saving money on rent all of those years.

3. Don’t buy a new car. A new car is a lot more expensive but will turn into a used one as soon as you drive it off the lot. If you’re worried about maintenance costs, consider a certified pre-owned car. I made the mistake of leasing a new car right after college but then purchased a used car in cash after law school.

4. Limit your eating out and entertainment budget. Give yourself a fixed amount to spend each month. You don’t have to track where every penny goes but when the money is gone, no more spending until the next month. On the other hand, if you have money left over, you can carry it over to be splurged in the future. This method forces me to prioritize and look for deals when going out.

5. Be smart with your smart phone plan. Consider staying on your family plan or using a prepaid cell phone plan. My prepaid plan with Verizon costs me about half as much as the regular Verizon plan without any noticeable reduction in quality or services. I also like to buy last year’s newest and greatest phone at a discount. It’s still an upgrade for me and I don’t have to worry about any quirks with the latest phones that haven’t been worked out yet.

6. Don’t pay down your student loans early. This one may sound puzzling but the fact is that student loan interest rates tend to be lower than credit cards and less than what you can likely earn by investing your savings instead. See if you can lower your payments with an income-based, graduated, or extended repayment plan. This way, you can put your savings towards paying off higher interest debt or higher earning investments.

7. Automate your savings. Once you’ve figured out how much you can save with the above strategies, have those savings set automatically set aside before you have a chance to spend them on something else. First, make sure you’re contributing at least enough to your employer’s retirement account to max the match. Then set up automatic contributions to an HSA (if you qualify), a Roth IRA, and savings accounts for short term goals like a vacation or home purchase.

Any other ideas? What have you done to save money? Feel free to supplement this with any tips of your own.