Five Personal Finance Tips for New College Graduates

May 20, 2021

As the culmination of years of hard work, college graduation is always an accomplishment worth celebrating. Graduating in 2021 — while the world is still dealing with the economic ramifications of the COVID-19 pandemic — may, however, feel daunting. Laura Cole, director of the Masters Investment Learning Center at the University of Tennessee, Knoxville’s Haslam College of Business, offers some advice to help new grads start off on the right financial footing.

1. Measure Your Wealth

To get a clear picture of your financial situation as a recent college graduate, Cole recommends determining your net worth by figuring out how much you own versus how much you owe. 

“At this point you may own nothing but owe your student loans, most of which have a six-month grace period,” Cole says. “Your goal is to be able to select reasonable repayment plans to reduce what you owe.”

2. Create a Budget

Budget creation starts with tracking where your money comes from and where it goes in a given month. Account for all your sources of income and be realistic about variable expenses such as food, clothing and entertainment, as well as fixed expenses such as rent, loan payments and insurance. To create a simple budget, many financial experts advise using the “50/30/20” rule.

“Spend 50 percent of your income on necessities like rent/mortgage, loan payments and groceries, and allocate 30 percent to splurges like entertainment, dining out and travel,” Cole says. “The remaining 20 percent should be used toward savings and paying down any high-interest debt (such as credit cards) you may have.”

3. Build an Emergency Fund

Be sure to save money for emergencies. Cole advises setting aside at least $500 each month, gradually increasing that amount until you have saved enough to cover all your personal expenses for six months. Keep your emergency fund in a high-yield cash management or money market account, or in a liquid savings account where you can access your money quickly if necessary.

“Do not rely on the ‘bank of Mom and Dad’ to help you with emergencies,” Cole says. “If you live within your means, you will be able to save for unforeseen circumstances.”

4. Establish a Retirement Plan

If your employer offers a 401(k)-retirement account, you can arrange to transfer money from your paycheck directly into your 401(k). Some employers match employee contributions up to a given amount, so be sure to contribute enough to get the full match. If your employer doesn’t offer a 401(k), you can set up an individual retirement account, such as a Roth IRA, through an online broker. 

“Your goal is to save 15 percent of your pre-tax income for retirement —  yes, even at the age of 21,” Cole says. “Thanks to compound interest, the sooner you can begin saving for retirement, the better off you will be and the earlier you will be able to retire.”

5. Use Credit and Credit Cards Wisely

Credit cards help you build credit, as does repaying loans in a timely manner. To keep your credit score healthy, you should use less than 30 percent of your credit limit in any given month, and pay off credit cards monthly. 

“Your goal is a FICO credit score around 700 so that you may earn low interest rates when you need to borrow money,” Cole says. “You can review your credit score and report for free once per year at”


Stacy Estep, writer/publicist,