If you just graduated, there’s a pretty good chance you’re sitting on a mountain of cash handed out from parents, grandparents, aunts, uncles, and maybe even people at your church or synagogue. When yours truly graduated about x number of years ago — you didn’t really think I would reveal such a thing, did you? — the haul totaled around $1,800. The future looked pretty bright in those days until a bad stock move and some pretty stupid purchases set me back to zero.
Doing dumb things with your graduation money is largely avoidable, and if you listen to personal finance counselor Louis Barajas instead of dummies like me, you could hold on to yours and maybe even make it grow.
Barajas stopped by NPR for a recent chat. Here are some of the highlights from what he had to say.
Point One: Invest In You.
According to Barajas, you might think about using your money to buy something that will help you to succeed — “tools to make them more competitive in college or maybe upgrading their laptop or using something that they’re going to be using towards college to become better students.”
Taking Barajas’ advice, that could mean virtually anything depending on your major. In the age of digital products, it might mean a high-tech piece of software for assistance with your engineering degree or a word processor specially designed for writers and English majors.
Point Two: Save For The Future.
Barajas cites “different purposes for money,” noting that “Some of it is for having fun and spending … But you’ve got to take a certain portion of it and save it for the future.”
Barajas continued: “Use it — because sometimes we’ll see some kids early in the first year of college who already have credit card debt. And we have to show them that you’ve got to pay down that debt. But the first thing I have them do, if they haven’t done it so far, is open up a savings account.”
Doesn’t sound very sexy, we know, but a savings account can help you collect your thoughts and avoid those zany temptations to spend stupidly. While interest rates generally stink on savings accounts, inactivity is better than allowing those wads of cash to scorch a hole in your pocket.
Point Three: A Wardrobe.
While Barajas first advises establishing an emergency fund and paying credit card debts down, he adds that “one of the things that I’ve told them if they graduate from college and they’re going to go into the workforce, is what about buying your first professional wardrobe. For a gentleman, it might be his first suit. For a woman, it might be her first professional dress for interviewing.”
Barajas continued: “You know, when I went to UCLA, all I owned was Bear Wear. That’s all I could afford at the time. I didn’t have a suit. I didn’t own a tie. And sometimes we need to use some of that money to invest in ourselves.”
Point Four: A Retirement Fund.
These days students are bombarded with horror stories about the death of Social Security, and those terror tales are not altogether unfounded. Instead of relying on a program that probably won’t be around in another few decades — right around the time today’s students are retiring — it would be best to start taking matters into one’s own hands. Barajas acknowledged in the comments to NPR that his daughter is “graduating from college this year, and I’ve encouraged her to open up a Roth IRA this year.”
By getting your graduation money in a place where it isn’t so easily accessible and investing it in mutual funds with proven 5-, 10-, and 15-year track records of growth, students could be well on their way to a more comfortable retirement than what SS would provide if it manages to survive.
Point Five: Travel.
Since the world is a lot smaller today than it was 20 years ago, Barajas does not discourage students with a little extra graduation money from traveling the world. “I’ve encouraged some of the kids to use some of their money that they’ve received from graduation to take a trip to Europe with other students and really understand who the world’s working,” he says. “I think that’s sometimes a good investment that we don’t even think about.”
Point Six: Determine The ‘Highest And Best Use’ For The Money.
Barajas explains that whenever he sits down with anyone, it is his goal to get at the heart of what the client wants. “Whenever I sit down with anyone — and we find what is called found money or windfalls — we’ll always ask them, what’s your highest and best use for this money? Is it for marriage counseling, if it’s for older people? If it’s for college students, is it paying down your debt? Is it investing in yourself?”
Barajas continued: “How can you maximize the value of the money that you’ve received to make you a better person or to do something for yourself or for others? And again, that’s just the training ground to get your mindset in the proper way for getting more money when you start earning more in the future.”
Point Seven: Celebrate Your Victories.
Barajas advises students to set aside a portion to celebrate victories whenever they’ve accomplished a goal. “When we set goals — and, for example, a child has had trouble passing their math classes and all of a sudden they’ve passed algebra,” he says. “They’ve graduated from high school or they’ve graduated from college, and it was a huge accomplishment, you need to focus on sometimes celebrating. We forget to celebrate our victories.”
Barajas continued: “And it’s a great thing because once we celebrate it, then we can set another bigger goal. It might be the child now wanting to go and getting their Master’s degree or getting a job in another country. And again, it’s wonderful to use money to help celebrate. And also, another important thing is to celebrate with others.”
In Summary
If you’re having difficulty figuring out what to do with that graduation money, glean something from Barajas’ multiple pieces of advice. You can save, spend, celebrate, or plan for retirement. Just know yourself and do something that is useful and meaningful to you.
Aric Mitchell's work appears regularly here at 4tests.com and across the web for sites, such as The Inquisitr and Life'd. A former high school teacher, his passion for education has only intensified since leaving the classroom. At 4tests, he hopes to continue passing along words of encouragement and study tips to ensure you leave school ready to face an ever-changing world.
If you just graduated, there’s a pretty good chance you’re sitting on a mountain of cash handed out from parents, grandparents, aunts, uncles, and maybe even people at your church or synagogue. When yours truly graduated about x number of years ago — you didn’t really think I would reveal such a thing, did you? — the haul totaled around $1,800. The future looked pretty bright in those days until a bad stock move and some pretty stupid purchases set me back to zero.
