Beyond the relative safety of college sits the stressful and sometimes messy world of adulthood. Where responsibilities were once limited to attending class, studying, showing up to a part-time job, and getting through each day, young people thrust in this new world are often overwhelmed with their new obligations.

College dorms and shared apartments get traded in for upgraded digs with higher rents. Meanwhile, your cozy college attire gets the boot, too; where you once wore whatever you wanted, you now may need sophisticated-looking outfits that comply with your office dress code.

Speaking of that, life after college usually means transitioning into your first real job. It means putting in extra hours to get ahead, learning to work and schmooze with people you don’t like, and possibly getting dumped on by your older and more experienced peers.

All of this might sound stressful, but life after college can be an amazing time, too. After all of your hard work – all of your sacrifice – you’ve finally made it. From this point on, it’s no longer just practice: Your life can be as prosperous as you want it to be – that is, as long as you put in the work and make good decisions when it counts.

What College Graduates Need to Know About Money

But, as anyone who has been around a while will tell you, life gets much easier when you learn to manage your finances sooner rather than later. Every new college graduate can benefit immensely from learning some hard truths about personal finance – and how they affect our lives.

We rounded up some experts to find out the most important money lessons for college graduates, and how understanding these lessons early could benefit their lives. What lessons are the most important for new college graduates to know and understand? Here’s what they said:

Lesson #1: How Interest Works – and the Power of Debt

Student Loan Hero founder and CEO Andy Josuweit owed more than $100,000 in student loans by the time he left school, which meant he learned how interest works the hard way.

“With student loans as well as other forms of debt, it’s easy for balances to spiral out of control because of interest,” says Josuweit. “This is especially true when borrowers aren’t covering interest charges every month and interest charges are added to the principal balance. Borrowers effectively pay interest on interest, causing debt to increase rapidly.”

Credit card interest, while calculated differently, can be equally troubling to any new college graduate’s finances. When you owe money, it’s not just the debt itself you have to worry about; it’s the monthly interest you’ll pay just for carrying that debt load from one month to the next.

College graduates would be a lot better off if they understood the realities of debt and how it can impact their financial lives in the long haul. When you owe money, you are beholden to someone else. And when you pay interest, it’s easy to get sucked into a vicious cycle of debt that can be extremely difficult to dig out of.

Related: The True Cost of Debt

Lesson #2: Credit Cards Aren’t Free Money

Credit cards can seem especially alluring to college graduates who need to buy new clothes, cell phones, or laptops to prepare for a job search or their first career. And new college graduates often get reams of new credit card offers in the mail, which makes it all too easy to sign up without a second thought.

However, college graduates (and everyone for that matter) would be wise to proceed with caution when it comes to credit. What seems like “free money” at first can come back to bite you – and hard – when the monthly bills start pouring in.

No one knows that better than Paul Kuzmickas, a bankruptcy lawyer practicing in Cleveland. Kuzmickas says he’s represented many new college graduates who quickly became overwhelmed by debt because they didn’t have a basic understanding of credit after graduation. Once they got used to cheap and easy credit and began racking up huge balances, they struggled to balance their new monthly payments with their new living expenses.

And while it’s true that credit cards can be a good way to establish credit if young people know how to use them responsibly, things can quickly go downhill when people aren’t aware of their credit card’s terms, including interest rates, fees, and penalties for late payments.

“A credit card with bad terms for the borrower may quickly drive a new graduate into more debt than he or she can handle,” he says.

To manage credit the right way, Kuzmickas suggests all new graduates be aware of their credit card terms and spending limits, learn how debt affects their credit rating, and only use credit as a companion to a written budget.

Lesson #3: What it Means to Live Below Your Means

College graduates getting their first real paychecks might be tempted to build a lifestyle that consumes every dollar. However, they might someday learn what the rest of us know already – that it’s a much better idea to live below your means instead.

Life happens, and there will always be some emergency to tend to, a home repair to complete, or a dream you hope to fund. When you live right at your means – or worse, beyond your means — you will struggle to meet these extra obligations. On the flip side, however, living below your means allows you some wiggle room each month, and the ability to afford whatever “surprises” come your way.

Kevin Gallegos, vice president of Phoenix operations with Freedom Financial Network, offers this advice to new graduates: “Know exactly what you have to spend each month, and then spend less than that. Living below your means goes beyond living within your means. It means deciding where your money goes, instead of being influenced by whims, advertising, habits, or peer pressure.”

Related: The Power of Social Indifference

Instead of buying all the house you can afford, buy a home with a payment you can easily accommodate. Instead of rushing out to buy an expensive new car, drive an older model until your career is more established. Then, in both cases, pocket the difference.

You’re probably tired of living like a poor college student by now, but if you can keep it up for awhile, it’s probably the smartest financial move you can make – especially at first. Because once you start enjoying the spoils of lifestyle inflation, it’s hard to go back.

Lesson #4: Comparing Job Offers and Negotiating Salary

While getting your first job out of college is an exciting event, several new studies show that college graduates don’t consider some important details when they compare job offers. For example, a recent study by Fidelity found that millennials don’t always consider the value of retirement benefits or medical benefits when they’re evaluating the total compensation of a job offer.

Looking purely at salary without factoring in these other components of a job offer is a huge mistake, says Stephanie Genkin. “Ignoring the power of employee benefits, for instance, if your workplace offers any, is a big mistake,” she says. “Your employer has calculated the value of things like 401(k) match and health insurance in their offer.”

Genkin says weighing which job to accept based solely on salary is a common mistake, and it can be a costly one. To gauge which job offer is best, it’s important to consider every benefit your new job may offer – including salary, paid vacation, retirement benefits, health insurance, and any other “extras” thrown in.

Related: 11 Benefits You Should Be Taking Advantage of at Work

Still, you shouldn’t stop there. Once you settle on a job offer you’re happy with, you should negotiate your way to higher pay if you feel your work warrants it. See our post “How to Negotiate Pay and Juggle Job Offers” for an array of expert tips on how to do just that.

Lesson #5: The Importance of Budgeting

While many people think of budgeting as a dirty “b word,” it is one of the most powerful habits anyone can get into – and that includes college graduates. By creating a budget, and living by it, you put yourself in the best position to reach your financial goals. And most importantly, you create an actual plan for your money so you’re investing in things that are important to you rather than wasting it on expenses that don’t matter in the long run.

LendingTree CEO Doug Lebda says that everyone should create a budget and stick to it – including college graduates. With a budget, he says, it’s much easier to design a lifestyle that is both realistic and desirable.

Believe it or not, you don’t have to use fancy computer software to create your first budget, either. Using the zero-sum budgeting method, you can easily create a spending plan using a plain ol’ pen and paper. Either way, you’ll be much better off if you choose a budgeting method that works for you, learn to live with it, and stick with it for the long haul.

Trust us, the type of budget you choose won’t matter nearly as much as the fact that you got started.

Lesson #6: The Power of Compound Interest

Most indebted college graduates eventually learn how owing money and paying interest hurts their finances, says Nate Tsang, founder of InvestmentZen, but they often fail to realize the upside of compound interest.

“The biggest mistake a college graduate can make is to start their financial journey by ensuring that compound interest is working against them, instead of for them,” he says.

By taking decades to pay down their student loans, new graduates view compound interest from the wrong side of the tracks. But by creating a solid investment plan, they can learn to use compound interest to their advantage.

To get the most out of compound interest, it pays to start investing early – even if that only means contributing to your work-sponsored 401(k) plan at first. If your employer offers a 401(k) match, you shouldn’t let that pass you by anyway, says consumer and money-saving expert Andrea Woroch. That’s free money, and it’s even more important when you consider that you can earn compound interest on your employer match. Who doesn’t want free money built out of more free money?

If your employer isn’t that generous, however, don’t despair. You can still set up an account on your own. “If your company doesn’t offer a 401(k) benefit, set up an account anyway and have the payroll manager deposit whatever amount you can afford from your paycheck,” says Woroch.

Conversely, you could consider setting up a traditional or Roth IRA on your own. Check out our post on the best IRA accounts to get started.

Related: Four Ways to Start Investing Without Much Money

The Bottom Line

College graduation is an exciting time for anyone, but that’s especially true if you’re able to transition into adulthood with a solid financial footing. By investing early, leaving to live below your means, and understanding the importance of these early financial decisions, you can be on your way to a financially fruitful future must faster than your peers.

Dave Ramsey is famous for saying that, if you live like no one else now, you can afford to live a better life later – and that’s absolutely true for college graduates especially. When you make the hard decisions in your early years, you can truly “set yourself up.”

When you’re ready to start having kids and buy your first or second home, you’ll be glad you sacrificed early on. With more money in the bank and plenty of investments building your nest egg, the life you want may be well within reach.

What financial lessons are the most important for college graduates in your opinion? Is there anything you wish you had learned earlier in life?

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