Important Financial Advice for Graduates

As graduation season winds down, I want to share my most important, most helpful, and most heartfelt piece of advice for everyone about to launch into full-fledged adulting. (If you’re reading this and happen to know and love one, I hope you will share this with them.)

The road to financial freedom starts with a commitment:

                 Live below your means, but within your needs

This is not advice for the rest of 2024, or for the next year, or decade. It is advice that if followed can bring peace, strength, and gratitude for an entire life.

Let’s unpack what I mean by live below your means, but within your needs.

This is all about how you use the money you have and will have. Living below your means is simply choosing not to spend every penny. Instead, make it your lifetime goal to spend what is necessary to meet your needs. 

I realize that right now, as you are launching into adulting you may find it hard to even meet your needs. I get it. But that just makes it even more important to think about how to live below your means today. Maybe it’s living with roommates, or considering a different part of town that is less expensive, or outside of town where it is even less expensive. Or maybe moving in with family for a stretch so you can build up your savings and get a sense of what it takes to support yourself. (Note: no freeloading. Even if parents insist they don’t need the money, you are to pay rent. That’s what adults do. Period.)

A car is another great opportunity to focus on “within your needs.” For starters, do you really need a car? Run the numbers. If public transportation is viable, and you would only use a car for infrequent weekend getaways, buying could be a lot more expensive than renting from time to time, once you factor in the cost of insurance and maintenance. 

And if you do need a car, the same advice becomes even more important. The cheapest car that meets your needs is to be the goal. Do not pay one second’s attention to what you are told you can “afford” to borrow for a car. Every dollar you don’t have to borrow is a dollar (plus interest!) that you can put toward other financial goals. When you make it a priority to live below your means you are consistently spending less than you can, so you can build more financial security.  

And that is the ultimate goal. I will never tell anyone that money is the key to happiness. But you better believe that overspending, too much debt, and a lack of emergency savings get in the way of it. 

A big warning sign you are not living within your needs is if you are using a buy-now, pay-later (BNPL) payment plan to buy wants, not needs. I know it’s tempting to be able to pay over 4 or more installments, rather than one big upfront payment. But ask yourself if BNPL is a crutch that lets you spend above your means.  Please stand in your truth, and make it a goal to never use BNPL for wants. 

I hope you will also keep living below your means but within your needs close by as you progress through life. This advice is what can protect you from indiscriminately increasing your spending as your income grows. Sure, as you make more, you can indeed spend more, but the goal should still remain to right-size your spending with the goal of building financial security. Buy the smaller house that meets your needs. Aim to keep driving the car rather than trading it in for something shinier. Living below your means is the gateway habit that sets you up for financial success for the rest of your life. That’s what I wish for you.