5 Must Do Financial Planning Tasks for New Grads

The following is a guest post from Janet Stanton of Goal Investor.

If you’re a recent college grad with a lucrative job, you may be unsure how to prioritize your spending and investing. Use these tips to organize your current finances and map out a bright financial future.

Now that you’ve landed that big job and are earning a healthy paycheck, you may be unsure how to prioritize your spending and investing — or maybe you’re so happy to be earning money instead of living the student lifestyle that you’re skipping financial planning altogether.

These simple steps will help you get your finances organized and get you headed down a smart fiscal path.

College Graduate
Set Up a Budget

Think you’re earning so much that you don’t need to budget? You might be fooling yourself:

  • 68% of Americans destroy their credit before age 30, according to a 2016 Credit Karma survey. More than a quarter of these young people had to move back in with their parents to recover financially.
  • Of households earning $100,000 or more per year, 40% said their spending was the same as, or more than, their income, according to a Federal Reserve report.
  • 71% of Millennials earning $75,000 or more annually said lifestyle purchases like dining out and entertainment caused them to save less than they should, a 2015 Suntrust survey found.

Convinced? Budgeting doesn’t need to be an overwhelming task. Apps like Mint, BillGuard and GoodBudget can track your spending.

Monitoring your money helps strike a balance between spending on the indulgences you want now (renting a luxury loft apartment) and investing for your future goals (owning a luxury retirement home in Costa Rica).

Establish an Emergency Fund

It can be tough to motivate yourself to save for a future financial crisis that might not happen, like a layoff or losing your uninsured iPhone, but everyone needs a rainy day fund to help them weather tough times — just in case.

In fact, building up your rainy day savings should be your first financial priority once you start earning a paycheck.

Most people should set aside about six month’s living expenses. Goal Investor’s Emergency Fund Planner can help you quickly run the numbers to see if a six-month cushion fits your situation, and make a realistic savings plan to reach your target.

Setting up automatic contributions will build your emergency fund with the least effort. You’ll sleep easier at night knowing you can handle whatever financial challenges life throws at you. You’ll also avoid overspending your way into expensive credit card debt in a financial crisis.

Start to Save for Retirement, ASAP

Does a 20-something worker really need to pay attention to retirement planning? Retired workers think so: More than a third of retirees regret that they didn’t start saving for retirement earlier, and suggested the best time to start saving was before age 30, according to an HSBC survey.

We agree the best strategy to maximize your retirement nest egg is to start investing when time is on your side. The earlier you begin preparing for retirement, the more years your investments have to benefit from compound earnings.

Take advantage of your workplace 401(k) or fund a Roth IRA at the very beginning of your career, and spare yourself the added pressure of playing catch-up with retirement savings when you’re older.

Do you have any idea what you might need to invest for retirement? Use our sophisticated Retirement Planner to calculate a target goal.

Establish Credit in Your Own Name

If you’re just starting out in the working world, you’ll need to build credit if you ever want to borrow money to buy a house, car or other big purchase.

Start by pulling a copy of your credit report, free, from annualcreditreport.com to see where you stand and make sure the information in your report is correct.

Major credit cards like Visa or MasterCard, store credit cards, auto loans and student loans help you create a credit history. You may already have some credit history if your parents cosigned a card for you while you were in college.

Now it’s time to apply for a credit card based on your own income and assets. If you’re turned down for a regular credit card, open a secured credit card account, which requires you to make a cash deposit to back up your credit line.

Once you have a credit card, paying your bills on time boosts your credit score. People with excellent credit scores frequently save money because they qualify for the best loan rates.

Manage Your Credit

Tackle Student Loans

As a recent college grad, odds are good you’ve got some student loans to deal with. Choosing the right repayment option and staying on top of your payments will get you out from under that debt as quickly as possible, and will build your credit history.

There are actually a number of different repayment plans for federal student loans (as opposed to private loans). The U.S. Department of Education has a handy Repayment Estimator that shows what your monthly payments would be under each repayment option. Consider total payments, too.

Full Steam Ahead

The first chapter of your adult life is an exciting time to explore new opportunities and challenges. Once you get your finances squared away, you can be on your way to a successful financial future.

If you don’t know what you’ll need to invest for retirement, chances are you’re not saving enough. Take care of your future self by creating a retirement investment plan.

This information is provided for educational purposes only and is not intended to provide investment or legal advice. SEI does not claim responsibility for the accuracy or reliability of the information provided. 

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.

5 Comments

  1. Nice guest post Janet! I am now about to graduate from university and find these tips very helpful. I think creating a plan before graduation or directly after can be very important. Set priorities and tick them off. Not everything needs to happen at once. Eg. I would argue that student loans need to be paid off before an emergency fund can be established. If they did want to establish an emergency fund I would keep it minimal to ensure loans are paid off. Take advantage of that 6 month no interest period and pay the principal!

  2. I think one of the biggest things new grads need to remember is they don’t need to do everything at once. It is hard to tame the thoughts of needing to go out and get all the things you are supposed to have as an adult, like a new car, house, clothes, etc.

    Even if you need those things (and you should take the time to figure out if you really do), take it slow when it comes to acquiring them. Otherwise, you will just rack of debt for things because you couldn’t wait and acquire things over time.

    • Great observation and suggestion. A lot can be gained by slowing down, determining priorities, and developing a plan that supports those priorities. Doing so will yield long-term success.

      Thanks for dropping by, my friend.

  3. Great post! I wish when I graduated from University someone had talked to me about budgeting and paying off debt. I just went to work and thought I was “balling” because I was making $53K and paying the bare minimum for my credit cards and student loan. If I could go back in time, I would do a lot of things differently.

    • “If I could go back in time, I would do a lot of things differently.” Indeed, I think most of us would. While student debt was never one of my issues – I was fortunate in that the Army paid for all my education through my graduate degree – I struggled with credit card debt on multiple occasions and made plenty of money mistakes.

      Thanks for stopping by and sharing your thoughts, my friend.

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