I remember that one of the most exciting things about graduating from both high school and college was the plethora of gifts, gift cards and money that I received from friends and family. I received around $500 for my high school graduation and around $300 for college graduation (I come from a very small family). I had friends that receive anywhere from a few hundred to more than $1,000.
For those of you graduating this spring, I am sure that your first instinct is to blow most of your graduation money on a shopping spree, expensive gadget or other items that you really want but probably do not need. Splurging seems like a good idea at the time but you may want to reconsider. If you are headed off to college, you will incur a lot of miscellaneous expenses in addition to tuition and living expenses. If you have just graduated college (with or without a job offer), you may be faced with relocation expenses and student loan debt. Although most loans have a six-month or nine-month grace period, relocation expenses come more quickly since you have to pay for traveling, moving, deposits and additional costs.
I used my high school graduation money to mostly buy stuff for my new college dorm. In the long run, I regretted this because many of the things I bought were not necessary and I threw some out because my style changed throughout college. After my college graduation, I used most of the money to pay off some bills. I really wanted to go on a shopping spree but I knew that that was a better decision. With all of that being said, here is a list of things to do with that graduation cash. You will thank me later!
- Put it in savings. It is common today that many Americans do not have much money in savings to tap into for emergencies or unexpected expenses. As someone who has been faced with several financial emergencies in the past year, I cannot stress how important it is to build a solid savings account.
- Pay off debt. Starting to pay back your student loans earlier can help you lower payments in the long run since interest is reduce. In addition, paying off credit cards with the higher balances help reduce money spent on debt over time as well.
- Get a used car. If you need a new car, don’t go buy a brand new one just because you have the extra cash. It will depreciate in value very quickly anyway. Shop around and get a used car instead. I personally got a used car last year from a car auction and it only cost $2500. It’s not the greatest car in the world and I have done a good deal of routine repairs but it definitely adds up to be way less than a monthly note for a new car.
- Don’t buy a one-bedroom apartment. Most of us imagine ourselves getting a tiny one-bedroom apartment after college. This is not the case for all of us. I have lived with anywhere from 2 to 4 other roommates for the past three years after I moved out of the dorms. I cannot even imagine living alone for at least a few more months. Paying one-third to one-fifth of the bills has saved me so much money. Also, moving back in with your parents for a few months is never a bad idea.
- Update your wardrobe. I wished that I thought to save some money to buy business clothes for job interviews. Today, I find myself mixing and matching the same pieces for each interview I go to. You will also want to have plenty of professional clothes on hand for interviews and to wear to the office once you land your first full-time job.
It does not hurt to splurge a little and celebrate because you have definitely earned it. Just be sure to spend your money wisely and think before you decide to make a huge purchase.