When Taylor Wilson graduated from college, he had about $1,000 saved.
Now the 24-year-old economist has a mortgage and is looking for a second home.
Wilson's situation might seem unusual. About a third of those between 18 and 24 have just $1,000 in a savings account, and only 6 percent of first-time homebuyers were under 25 last year, according to Adam DeSanctis, a spokesman for the National Association of Realtors.
Wilson, who makes about $90,000 annually between his job at the Labor Department and a tutoring side-hustle, is part of a small percentage of recent graduates with annual incomes close to six figures.
While many recent graduates would love to make that kind of money in their first job, for those who actually do, there are a number of steps they should take to make sure they don't fritter the cash away, advisors say.
Wilson's goal, for example, was to buy a home one year after graduation.
To save up, he spent a year living with three roommates, each of them paying about $600 a month in rent. It was a "short, intense" period of living in a crowded place with a long commute, he said, yet it paid off.
"All of us had the same plan, so we all hunkered down in this duplex in Alexandria for a year, and then we all bought houses," he said.
Renting is effectively paying off someone else's mortgage, Wilson said. Why not work toward paying off his own?
Wilson saved $10,000 in the year he spent in the duplex, and used $6,700 as a down payment on a condo. He spent as if his income were $10,000 less than it was, he said, and simply put the extra funds into the low-cost Vanguard 500 index fund. The home he bought isn't his dream house, he said. But it's his.
Wilson hopes to purchase a new home soon and rent out the one he currently lives in. If he is able to buy a number of properties and rent them out, Wilson said, he hopes to be able to retire early, and spend his time pursuing other passions, such as volunteering at the National Archives and teaching children in underprivileged communities mathematics.
Saving up for a home purchase is a good idea, yet savers who are less savvy than Wilson may want to hold off on making a purchase, said Tim Maurer, director of personal finance at Buckingham Strategic Wealth and The BAM Alliance.
Why? That's because transaction costs associated with buying and selling a home can be up to 15 percent of the total, even in a rising market. At the start of your career, it might not make sense to put down roots, Maurer said.
He said building up savings outside of a retirement account, however, does make sense.
"The amount of money that you would need for that home down payment will benefit you whether you need that home or something else," Maurer said. He said that money could come in handy if you want to start your own business, for example, or take a year off and teach English in Costa Rica.
How to start investing your first big paychecks
1. First, contribute enough to your 401(k) to get the full employer match.
2. Next, open and fund a Roth IRA to the full amount.
3. Then, max out your 401(k) if you still have spare cash.
"You can't always save 10 percent, so over-save at the front end," Maurer said.
"I would love to get a condo and have that appreciate as an asset," said Chase Jordan, a 24-year-old senior consultant at Booz Allen Hamilton. But Jordan said he likes living close to work too much to get a starter condo — and enjoys the freedom that renting provides.
Last year, for work, Jordan said he moved to the Middle East with about a day's notice.
"You never know what city you're going to be in, or where the next opportunity is," he said.
Instead of real estate, Jordan said he invests his money in a variety of different securities – a task he's now looking to outsource as he spends more time at his job. Jordan, who said he makes between $75,000 and $95,000 a year, said he has more than $15,000 in a brokerage account, and a similar amount in his 401(k) plan.
Like many recent college graduates, Jordan also has student debt. While the average outstanding student debt balance is about $34,000, Jordan said he has about $15,000 left to pay off. As a former finance major, having debt does not make him uncomfortable, he said.
"If your student loans are not private loans with huge interest rates, then it makes sense to just keep them, and just make sure you're paying them off on time," said Avani Ramnani, director of finance at Francis Financial.
Ramnani said that recent graduates should not be in a rush to pay down their student debt, as long as they can remain disciplined and not take on other forms of debt.
Another key for high earners is setting aside a generous rainy day fund, Ramnani said. She tells her clients to try to squirrel away three to six months of savings in a separate account that they don't touch, in case of an emergency.
Maurer said high earners could be even more ambitious, and aim for a year or two of living expenses. He said that, in his experience, young people with large savings tend to enjoy their jobs more, because it relieves the financial pressure to stay in the job just for the paycheck.
Yussre ElBardicy, a 23-year-old project manager at Epic Systems, a health-care software company, said she is saving thousands of dollars by living in Madison, Wisconsin. She has saved up about two or three months of income — enough to live in her current apartment for more than a year — and has spent her disposable income largely on medical services that she could not afford in college.
"I'm trying to invest in myself before I actually need to put that money into more important things like a house or a family," she said.
It is important that recent graduates realize that this sort of financial independence is not just for retirees, Maurer said.
"This is the phase of life where you can decide what you can be," he said.
By saving and investing smarter, recent graduates can make that decision without having to worry quite so much about when the next paycheck is coming — or what happens if it doesn't.