How to Use Graduation Gifts to Improve Your Financial Future

graduation giftsIf you’re graduating in May, congratulations are in order – assuming you make it through finals, that is. You’ve survived four years of nose-to-the-grindstone studying, four years of ramen noodle breakfasts and four years of frantic, last-minute papers. Your family and friends are eager to celebrate your accomplishment, and one of the ways they know how to do that is with cash.

It may seem crass to plan for gift money you haven’t gotten yet, but it’s crass with a purpose. Money you don’t have a plan for has a funny way of turning into concert tickets, electronics and other splurge items. Making a plan to use your graduation money can prevent you from relying on debt to cover your lifestyle startup costs. Consider making space in your graduation gifting for these must-haves.

A Professional Wardrobe
If you have a new employer waiting for you to show up to work, chances are they won’t be as sympathetic to sweatpants and band T-shirts as your TA was. Getting a set of professional items of clothing will help you hit the ground running on day one. You won’t have to worry about cramming into dress clothes that did fit before you spent 3 years eating pizza every other day.

And stocking up shouldn’t have to cost an arm and a leg, either. In fact, summer is a particularly good season for sales. In the next month or so alone, many large retailers will be offering Mother’s Day, Memorial Day, and Father’s Day sales that you can take advantage of for cheap work attire.  Other smart tips:

• Instead of blowing your money on one suit, look for affordably priced separates.  Five versatile shirts and a couple of pairs of pants will provide you with 10 outfits – enough for two weeks of work.

• Check out thrift stores in nicer neighborhoods for good deals on lightly worn clothing.  You’d be amazed at the quality of clothing some people are willing to part with.

• Shop the off-price retailers for deep discounts.  T.J. Maxx, Marshall’s, and Stein Mart are good sources for name-brand clothing that can be had on the cheap due to forecasting errors, overruns, and canceled orders.

• If you don’t have a job yet, buying a good “interview” outfit can be a wise investment.

Start Saving for Retirement
It’s weird to think about how your career will end before it starts, but it’s never too early.

Starting a Roth IRA will keep your money growing tax-free. You’ll need to start this some time, and it’s much less daunting to add to a retirement account than to start from zero. And if your new employer offers a contribution matching bonus – say 50% of every dollar you contribute up to 3% – it’s an absolute no-brainer to participate up to that level.  The matched contribution is free money, after all!

Though early withdrawal of IRA funds should be limited for many reasons, the money is available for major purchases like your first home, or if you need it due to a medical emergency.

Build an Emergency Fund
Right now, your financial future is very fragile. You’ve spent a lot of time and money developing your ability to work and making yourself more attractive to an employer.

What would you do if you found yourself unable to work for several months? What if you needed car repairs to get to work?

Right now, before you have to worry about a rent payment or a utility bill, is the best time to start saving for those emergencies. Stashing away a little money in a rainy day fund is one of the best ways to insure the significant investment you’ve made in yourself.

Although it might be tempting to use your graduation gifts for fun in the sun this summer or to blow off steam after a long, hard four year journey, making a plan for the money you receive can help you get a financial head-start on the next phase in your life.

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