Hey, recent grads! First of all, congratulations! You’ve studied hard, you’ve got your diploma, you’ve earned a degree, and now . . . get set . . . your real education is about to begin.
If you’ve got student debt, and most likely you do, you’ve also got a lot of questions . . . like what your next move should be.
In spite of all the knowledge you picked up in college, chances are that Personal Finance 101 wasn’t part of the curriculum. So, to help you to start practicing some good money management, here are a few basic tips to follow once you land that first job.
1. Your Financial Roadmap
You’d never set out for an important journey without having some kind of roadmap or itinerary. And for this particular trip, the roadmap is called a “budget.”
Mapping out a budget is a great way to help you monitor when you might be getting off course toward spending more than you make. Begin first by adding up the essentials, like rent, utilities, groceries, transportation, student loans, and possibly a car loan. This way you can see how much is left over for other spending and saving.
2. A Fall-back Fund
In our younger days, we all felt invincible, but let’s be honest . . . stuff happens! You should always be prepared for the unexpected by beginning to sock away three to six months worth of your earnings in a savings account. Even the smallest regular deposits will help you build good saving habits. The most painless way is to set up an automatic paycheck deposit and deduction from your checking account. This way you will have the funds to fall back on when the going gets tough, or when that unanticipated expenditure pops up.
Now there’s a word we bet you weren’t expecting! And no, this is not about your dad.
It’s about you. Today! Because time-travel sci-fi movies not withstanding, the day of your own retirement will inevitably arrive. Meanwhile, if you need an incentive to start saving now, Google “benefits of compounding interest.” You will discover how the money you save now can reap rewards down the road. And ask your employer about a 401K Plan. You’re going to thank us later for that little tip!
4. A Good Credit History
Empty out your wallet right now and cut up all but one essential credit card. You will be eliminating needless temptation, and the possibility of digging yourself into a deep pit of debt. You do need one card, which you can use to help build a credit history, but make sure you always pay that card off on time and in full! We cannot stress this enough!
5. Financial Independence
You are asking, “Wait, what? Becoming financial independent? Me?” OK, this may seem totally out of the realm of possibility today, especially as you probably need to extend that Top Ramen diet for a while longer.
Nevertheless, today is when you should begin making many of those important money decisions in your life. You can take the ideas we have suggested and nurture them. How successful you are in establishing good money habits will determine your financial future. It’s going to seem overwhelming in the beginning, but with time, patience, and some sensible planning, becoming financially independent is definitely possible.
Never hesitate to consult with a financial advisor. They can review your situation and steer you in the right direction.
Congratulations on a job well done, grads! And Good Luck!
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Judith McGee and not necessarily those of Raymond James. 401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty.