Today’s college graduates face significant financial challenges.
It can be quite the shock to enter a world where student loans, credit card bills, electricity bills, cable bills, rent, cell phone bills, car payments, insurance payments and more demand to be paid, especially when job searching.
That’s why our team has compiled some of our favorite practical words of wisdom for new graduates regarding their finances – but, of course, they are applicable to everyone.
Create a Budget
Track your monthly and yearly expenses and create a budget that helps you understand where your money is going each month. It doesn’t have to be complicated, and there are many free financial tools online to help you do so. Establishing and sticking to a budget makes it easier to save up for the fun stuff in life while also ensuring that you can pay your bills and living expenses each month. It’s a simple and smart financial move. (Bonus: tracking your expenses each month makes life much easier when it’s time to file your taxes!)
Prioritize Establishing an Emergency Fund
This is one of the most important financial moves you can make, as it can mean the difference between being financially devastated by an unexpected $2000 car repair bill and having the money on hand to take care of it out of pocket. Your emergency fund should contain enough funds to cover three months of expenses and should only be used in the case of emergencies. It’s a good idea to keep it separate from your checking account so you’re not tempted to spend it on the latest iPhone or a trip to Vegas.
Pay Off Credit Card Debt
Credit cards tend to have high interest costs that prevent you from saving your money and building wealth. It’s estimated that recent graduates have an average of $2,500 in credit card debt. It’s important to build your emergency fund and pay off your credit card debt so that you can start focusing on building wealth.
Don’t Skip Free Money
Starting a new job? Find out what kind of retirement benefits your company offers. Will they match your contributions? Many companies will match up to a certain percentage of your pay–so you’re saving double the money for free. You may feel like you’re too young to start saving for retirement, but saving now will allow you to harness the power of compounding interest and could even give you the ability to retire early.
Contribute to a Roth IRA
After building your emergency fund, paying off credit cards, and taking advantage of free money available through your job, make the effort to invest remaining money in a Roth IRA. This is a great place to invest the “extra” money you may have on hand.
Becoming smarter with your money is a process, but starting early will keep you ahead of the curve.
Want Some Help?
The team at Baker Retirement & Wealth Management, PC have been serving the greater Evansville area for nearly thirty years and are happy to take the time to help you. Our team understands what it takes to help college graduates. Stop by our office or give us a call toll free: 1-866-244-3517.Talk to a CPA for Free