Your Financial Life After College

Many college grads spend more than they should. Day to Day's personal finance contributor talks about the dos and don'ts of spending and saving post-graduation.

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ANTHONY BROOKS, host:

This is DAY TO DAY. I'm Anthony Brooks.

MADELEINE BRAND, host:

And I'm Madeleine Brand.

Many college graduates are starting their first real jobs this summer, and unfortunately many will begin their working lives by making some real financial mistakes.

Here with some advice for graduates is Michelle Singletary; she's DAY TO DAY's personal finance contributor. Hi, Michelle.

MICHELLE SINGLETARY: Hi. How are you?

BRAND: Well, what are some of the biggest mistakes new graduates make?

SINGLETARY: Well, you know, they come out and they're so - I love them, they're like little new babies and they're all excited and they want to get a new car and a nice apartment. And so they begin to spend like they've seen their parents spend, many of them.

So they buy a new car when they should buy a used car. And they don't put away money for a rainy day right away. They don't sign up right away for their retirement plan. Or if they do, they're not putting enough in that will allow them to retire in the luxury they think they deserve.

BRAND: You know, these people, though, they're probably 21 years old, 22 years old; they're not thinking about retirement.

SINGLETARY: They're not. But you know what? The best thing that you have on your side when you're young is time. And the earlier you put away money, the least amount you have to put away because you have a longer period to save.

BRAND: Okay, so aside from investing in 401Ks, what else should they be doing?

SINGLETARY: The number one thing you should do is to put some money away automatically from day one when you get that new job. March yourself up to the benefits office and have some money automatically divert it from your paycheck into an account. And it should be separate from your regular checking and savings account. And that has become my emergency fund. And actually even more than that, because I, you know, save more than three to six months living expenses now. You've got to do that and you've got to do it automatically. Don't get an ATM card with that account. Choose an institution that has few branches. Make it as inconvenient as possible to get at that money.

BRAND: What, Michelle, is the one thing that new graduates often forget to do?

SINGLETARY: You know, one thing is to get off of all those lists that send those solicitations to get a new credit card or, you know, buy that car they always desire. So they ought to sign up to get on the government's do not call list. And all you have to do is go to donotcall.gov and also opt out of those credit card solicitations. And if you go online, you can do it at optoutprescreen.com or you - there's a 800 number. Call those too so that you will not be tempted by all those offers to get credit that you don't need with money you don't have.

(Soundbite of laughter)

BRAND: Maybe that's the one thing that graduates should remember. They don't really have money.

SINGLETARY: They don't. They don't. I think a lot of them will be disappointed and surprised at how that money is not going to go as far as they think. Once they save for retirement, put away in the emergency fund, start tackling that student loan debt and any credit card debt that they have, which many of them have, that money is going to go pretty quickly and they need to do these things. Like, you know, I talked about get a used car. And when you get that car, don't get a car loan for more than 48 months or four years. If you get a car in a note that's longer than that, you cannot afford that car.

BRAND: Thank you, Michelle.

SINGLETARY: You're welcome.

BRAND: That's Michelle Singletary. She's DAY TO DAY's personal finance contributor and she writes a nationally syndicated column. It's called The Color of Money. Michelle also has an NPR podcast that you can download for free. You know, Michelle, you like that, free. Just go to our Web site, npr.org/colorofmoney. Color of Money is all one word.

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