How to Build Wealth After Graduating College

I would like to start this article by saying not everyone is going to agree with what I have to say and that is okay. You may be asking what grounds does a recent college graduate have to tell me about money. The short answer is I don’t, however I would like to write about what I learned from my mentors throughout my years in college.

Graduating college is a scary time for most people, the average salary post grad is $55,260. Compare that to the average student loan debt post grad which is $76,620 on federal borrowers. This number seams daunting especially when your loan is 1.4x your yearly salary. I graduated this year in May of 2023 and am going to write about what I learned about finances.

I like to look at things at the face value and assign facts to my decisions. These points will be blunt but will provide you with realistic ways to save more and start saving for retirement.

1. Match whatever amount your company is willing to match in a 401(k) account. An example of this would be if your company offers a match up to 4% of your yearly salary we want to opt into that program. To put numbers to this lets take the median salary of $55,260. Below you can see if you get a 4% match you are putting away $184 per month into your 401(k) you will retire with $1,310,000. Congratulations you are a millionaire by just following the first point. Here is the link so you can put in your own income.

2. Open up a Roth IRA. We are only going to invest 15% of our income which on $55,260 is $8,289 per year. Now I know what you are thinking, “this is pre tax”. You are absolutely correct I will address this later. Looking back at the 401(k) match we put in $2,208 which leaves us with $6,081 left to invest into the Roth. With our information in the calculator we will retire with $1,370,000 leaving you in total with $2,680,000 when you retire. As a recent grad the biggest advantage we have is time. Here is the link to the calculator so you can put in your own income.

3. Do not take out a loan for a vehicle pay cash for it. The average monthly payment for a new car is $716 per month. For a used car it is $526 per month. There is no reason to impress people that you do not care about. Get something cheap and reliable.

4. Pay off all debt as fast a you can. Personally I would use the debt snowball method that Dave Ramsey suggests. Start by writing out all of the debt you have. Then list them out smallest to largest, next you make the minimum payments for all debt except the smallest. Pay as much as you can onto the smallest until it is paid in full. Then repeat.

5. Don’t buy things you can not afford. If you were to look at whatever amount you are about to spend and it was sitting on your counter and just burned up would it affect you? Whenever you make a purchase ask yourself if you would rather have this item or the cash.

As a recent college graduate, you can stretch your money far. The most basic way to keep and build wealth is to live on less than you make. I can show you examples of how to do it but the basic principle comes down to can you spend less than you earn.