Tuesday, May 26

Bruin Bucks: Make money moves after graduation by investing, paying off student debt fast

(Nghi Nguyen/Daily Bruin)

It’s no secret that finances are often left to a student’s own devices: stocks, bonds, investing, assets – what do all these terms mean? Bruin Bucks tackles the confusing parts of personal finance they don’t teach you in school.

Sure, we’ve learned in every science class that mitochondria are the powerhouse of the cell. But what do we know about filing taxes?

Despite UCLA offering over 130 undergraduate majors across seven different schools – with students having the option to study topics ranging from art history and American literature and culture to marine biology and ethnomusicology – nowhere do any practical classes on financial literacy make the cut.

UCLA is not the only school failing to teach its students basic personal finance. In June, the U.S. Financial Literacy and Education Commission released a report recommending all American universities require mandatory financial literacy courses amid news that student loans are now the second-largest category of household debt in the U.S., trailing only home loans.

To better prepare you for making money moves after graduation, we’ve provided tips in three key areas of financial literacy important to young graduates.

Student debt

There is collectively more than $1.4 trillion of student debt in the United States today. As of 2017, the average student graduated with $37,172 in debt. While more students than ever before are going to college, there are also more graduates starting their careers thousands of dollars in debt.

Fourth-year psychobiology student Rachel Caprini said she’s anxious to see how her student loans will impact her financial decisions after graduation.

“I have no idea how to conceptualize the debt I’m going to be in by the time I enter the workforce and what that means for buying a house, saving up and being able to indulge,” Caprini said.

Kenji Nightingale received his MBA in finance from the UCLA Anderson School of Management in 2009 and now works as the vice president of finance at FanDragon Technologies.

Nightingale believes the top priority for anyone graduating from college with debt should be to pay down their debt as quickly as they can.

“If you’re graduating and you have loans, unless you have investments that produce returns greater than the interest rate of your loans, put all the money you can into paying off the loans as fast as possible,” Nightingale said.

Saving money

There are some simple ways graduates can limit their expenses and begin to build up their savings.

To minimize housing expenses, more millennials are living at home now than at any other time this century.

“At the beginning, you should try and limit your housing expenses as much as possible by either moving back in with your parents or maintaining a communal type of lifestyle by living with roommates,” Nightingale said.

Another way students can learn to save up money is by making weekly or monthly budgets and sticking to them.

Caprini says she’s already gotten in the habit of mapping out her budget on spreadsheets to see where her dollars are going.

“When I first came to UCLA, I had to learn how to budget and figure out my spending by month to see what exactly I was putting my money toward,” said Caprini. “It wasn’t a UCLA-taught skill but a self-determined UCLA survival hack.”

Students can get in the habit of budgeting by tracking their expenses while still in college to give themselves an idea of how much money they’ll need to be taking in to cover costs. Knowing how to limit one’s spending, no matter whether you’re still in school or graduated years ago, is always a practical skill that can help you grow your net worth. Consider using free budgeting apps like Mint or You Need a Budget to help keep track of your spending.


Once you’ve graduated from the No. 2 ranked school in the world in graduate employability, earned a high-paying job and paid off those pesky student loans, what should you do with your money?

“After you’ve taken care of housing expenses and loans, devote 20-25% of income to diversified investments,” said Nightingale. “401(k), (individual retirement accounts), real estate. The time value of money is the most powerful tool you have as a young graduate.”

Fourth-year microbiology, immunology and molecular genetics student Ryan Messick said he’s unsure how or where to invest his income after he graduates.

“I don’t know how I am going to want to invest a portion of my savings,” said Messick. “I wish I knew an easier way to follow news stories and invest in companies on the stock or bond market as a result.”

However, there is no lack of options when it comes to investing your money. While actively investing in the stock market can require significant time and energy on your part to stay up to date on market news and stock price fluctuations, consider investing your money in simple index funds that return smaller, but often more consistent returns year in and year out.

Defined by Investopedia, an index fund is a type of “mutual fund with a portfolio constructed to match or track the components of a financial market index, such as the Standard & Poor’s 500 Index.”

In other words, by investing in the S&P 500, you’re investing in the top-500 companies on the New York Stock Exchange and Nasdaq stock exchange as determined by Standard & Poor’s, a global credit rating company. Legendary investor and CEO of Berkshire Hathaway, Warren Buffett has long held that simple index funds provide the best return on investment for the average American investor.

In his 2016 letter to shareholders, Buffett wrote, “When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.”

Roth IRAs are another simple way of investing your money for retirement. According to Investopedia, a Roth IRA is a “retirement savings account that allows you to withdraw your savings tax-free.” Your money is taxed when you put it into the account rather than after it accumulates compound interest and you withdraw it.

To show the power of compounded interest of a Roth IRA, consider this example: If you start contributing at age 21 the maximum amount allowed annually to your Roth IRA account, $5,500 – and we assume a 7% annual return – by the time you’re 65, you’ll have contributed $220,000 to the account and it’ll be worth $1,423,747.

The first step to any personal finance decision revolves around finding a job that pays enough money to have the luxury of being able to save for the future. Once you do find that well-paying job, we recommend cutting unnecessary expenses, paying off your student loans as fast as you can and keeping diversity and long-term growth in mind when investing your money.

Personal finance is not astrophysics – by following these simple tips you can grow your wealth and prosper financially. Who knows? Maybe one day you can have a hall named after you, too.

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