Hey grad, congrats! You made it to the end — or shall we say, the beginning! Assuming you just graduated with a traditional 4-year degree and before that attended K-12th grade, you’ve accumulated about 21,600 hours inside a class room. That’s equivalent to 3 years of non-stop learning! You should feel really smart by now.
Now that you’ve made it and lived to tell the story, we thought we would equip you with a few financial tips to help you make it in “the real world” -- the things they may not have taught you in the classroom. As experts in helping people build and manage their wealth, there are some key common denominators in people who were successfully able to build a comfortable nest egg. The good news? Having a high paying job (although it certainly helps) is not one of them!
1) Start saving 20% of your paycheck.
If you can save 20% of your paycheck right off the bat, you'll be WELL ahead of your peers and on the fast track for wealth-building. There is no better time to get into this habit than right after college when most have no mortgage or family to financially support. Just getting in the habit of saving is often the biggest step a person can take. This is step one, even before paying off your student loans. Start saving.
If you can't save 20%? Start smaller, start at 10% and make a plan to work your way up to 20. Perhaps increase it 1% every 6 months until you get there.
2) Start a budget.
There’s that word. We said it. You knew it was coming. Would you have preferred we bait and switched it with “income and expense tracking” or “cash-flow guide”?
A budget simply tracks what you’re doing and where you’re going financially, and allows you to make decisions based on it. It is your Google Maps, or your recipe for that dish you’re making. Track your income and expenses so you know what you’re doing!
3) Chip away at debt.
How do you get yourself out of a hole? First, you recognize that you are in a hole and you stop digging! That means doing everything you can to stop taking on additional debt (personal loans, credit cards, etc.).
Secondly, you start climbing, one step at a time. The key isn’t speed, the key is moving in the right direction at a pace you can maintain.
4) Understand that all debt is not created equal!
This is the part where we tell you not to take out credit cards… but seriously, don’t do it! Credit cards and high interest loans are rarely, if ever, a good idea. For someone just graduating, you may be tempted to view credit cards the same as you would a student loan debt.
Student loans can be a necessary evil to get you to where you want to go in life. Credit cards will almost always do the opposite, they’ll help fulfill a temporary need or desire while hindering your financial future. Using a credit card is often the first sign that you are living beyond your means. This lifestyle will not build wealth!
5) Have some fun with your money!
You’re still young! If you follow the tips above, you’ll be well-positioned financially and mentally. Don’t forget to take some of your money and do the fun things! Travel, explore, find yourself. If you've set up the correct parameters for spending, you can do so guilt-free!
Remember, you only have the fountain of youth for so long and then it fades. Not to sound depressing, but seriously, it’s all downhill from here. Of course we are kidding, you have MUCH to look forward to.
Congrats on graduating, best of luck in your future! Let us know if you would like to sit down and map out a financial plan for the next 5, 10, 60 years!