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Tips for Spending Graduation Cash

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 for 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.

  1. 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 two or three 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 fit before you spent three years eating pizza every other day. And if you don’t yet have an employer, buying a good “interview” outfit is a wise investment.
  2. 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. 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.
  3. 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 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 protect the significant investment you’ve made in yourself.

Graduations are a time to celebrate, and you should take a moment to treat yourself—you just deserve it! But don’t spoil all your earnings for short-term gain. Make a plan that will help set you up for success for the long haul.

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