You’ve got the diploma, and maybe you’ve even landed a first real job in your career. Great start. Be ready to leverage your success and weather the financial challenges that may come your way with these seven financial tips for college graduates.
1. Make student loan payments
Classes may be over, but a student loan payment is not something you want to skip. Make room for them in your monthly budget, and paying them on time each month will help you build a good credit record.
“Make sure to pay the minimum payment on any student loans, or if you cannot afford to pay them, pursue other options,” says Anthony LaBrake, a certified financial planner and associate adviser at Adam Financial Associates. “There are several options available to people who cannot afford their loans, especially people who work in careers like teaching.”
Reach out to your lender about payment options that will lower your current monthly payment.
2. Pay yourself first
Make saving for your future plans and hopes a top priority.
“Pay yourself first. Set aside money to save before you spend it,” LaBrake advises. “Don’t wait (until) the end of the month to see what you have left to dedicate to savings.”
One trick to saving up some cash is opening a separate, special savings account. Andrew Jamison, a certified financial planner with Main Avenue Financial Services, recommends opening a checking account away from your primary bank for just this purpose.
“Set up a payroll deduction of a small amount — $25 — per pay period that automatically goes to that checking account,” Jamison says. “Do not set up online access to that checking account, no debit card, no checks, throw them away if they come in the mail. Make it so that the only way to get money from that account is to go stand in line at that bank.”
He also recommends increasing the payroll deduction into this account each time you get a raise at work.
3. Max out workplace retirement contributions
Sign up for your company’s retirement plan.
Make it the first thing you do on the first day with a new job, says Doug Bellfy, a certified financial planner at Synergy Financial Planning.
“On day one, sign up for your company retirement plan and contribute 10 percent of your pay and happily take the free money of the company match, Bellfy recommends.
If you can’t afford to max out your savings, at least invest enough to get the company match, LaBrake says.
“Max out your workplace retirement plan if you can,” LaBrake says. “Most people just out of college cannot, but you should at least contribute to get the maximum employer match if they offer one.”
4. Get to know HR
Starting a new job? Get ready to dig into your employee benefits with your human resources contact.
“If your new employer offers you workplace benefits, carve out the time to read the open enrollment materials. If they seem like gibberish, ask HR, a knowledgeable family member, or a trusted adviser to help walk you walk through it,” advises Charlie Bolognino, a certified financial planner with Side-by-Side Financial Planning.
“Maximizing the benefits available to you is a powerful way to protect yourself financially (in the case of insurances) and to grow your wealth (through a 401(k) match, for example). Your future self will thank you!
5. Don’t pile up debt with plastic
Got credit cards? Go easy on the charges. High-interest credit debt is a real drag on your future.
Jamison recommends avoiding them altogether calling them “terrible.”
“If you do get a credit card, keep the available limit small. You can set this with the company, and pay it off each month in full,” Jamison advises.
Paying your balance in full each month is good for your wallet since you won’t be hit with finance charges. It’s also a good way to build up a good credit payment history, which will help to boost your credit score.
6. Invest early and stay invested
Get into investing, and stay for the long haul.
“Many young people starting their careers do not invest their savings and in doing so miss out on precious compound growth. Once you have an emergency fund (three to six months of expenses) stashed away, you should be investing what you save,” LaBrake advises.
“The second part of this is that it’s crucial to stay invested when markets are under-performing. Market timing is nearly impossible to do, and an example you see a lot is if someone missed just 10 of the best market days between 1992 and 2003, their account would have half the value of someone that stayed fully invested.”
7. Use smart money apps
Put your phone to work for you, by saving money with these smart money apps.
One of our favorites is partner site You Need a Budget, which can help you figure out where every one of your dollars will go.
“A few good money management apps that I feel would be great for recent grads are Mint, Robinhood and Acorns,” LaBrake says. “Mint is a personal finance management app owned by Intuit that links to all of your accounts. It helps track your income and expenses for all the accounts it is linked to. It is great for building a budget and can even be set up to send bill pay reminders, as well as weekly summaries that help you stay in line with your budget.”
Ready to start investing? Try Robinhood.
“Robinhood is a free bare-bones brokerage app that allows you to trade stocks and options for free,” LaBrake says. “It is a great way for recent grads to start investing free of charge and begin to build an investment portfolio.”
Need help keeping all your different accounts together? Try Acorns.
“Acorns is an app that links to your debit, credit and charge accounts. It rounds up every purchase to the nearest dollar and deposits the difference in one of their portfolios,” LaBrake says. “This app is a great way to force recent grads to save and invest.”
What money tips do you have for the newly independent? Share them in comments below or on our Facebook page.