Financial Advice for the New Graduate

It is graduation time for young adults as they are starting a full-time work life either with a high school diploma, or college degree.  The best financial advice for a new graduate is to stay out of credit card debt and save each month.  As a new graduate, you should know some basic financial planning information to get you started on the right foot.  The first advice that experts give is that you should spend less than you make at your job.  If you spend less than you make, then you can save for future purchases, pay off debt, and invest for your future. 

The new graduate may be solicited by many credit card companies to sign up for free credit cards and short-term low rates.  They must realize that the interest rates will increase substantially after the end of the short promotional rate period.  If you know a recent graduate, then you should encourage them to get into the habit of saving a portion of their income no matter what else is going on in their life.  The habit of saving is extremely important in ensuring they live below their means and they have some funds saved to fall back on in case of emergency.  Here are some suggestions to make sure the recent graduate begins savings, avoids “bad” debt, and begins to secure their financial future.

A realistic budget is a very important initial step in the process of making sure you spend less than you make. 

-Start a savings account for emergencies to ensure you are not living paycheck to paycheck when something unfortunate occurs.  You need to define for yourself what constitutes an emergency that the money can be used for.  

You should set aside some money every pay check to have available for smaller unexpected expenses that you did not budget for in the short term.  These amounts are in addition to your emergency fund that is set up for unexpected larger long-term expenses. 

-Save for retirement by having the money directly taken out of your paycheck and contributed to a 401k plan ideally in an amount that maximizes the employer matching percentage. 

-At the very least get started contributing to your employers’ retirement plan with the minimum percentage allowed, then increase the contribution as you receive raises.

-If your new employer does not offer a retirement plan, then set up automatic contributions to a Roth IRA invested in a stock mutual fund. 

-Use credit wisely to balance building up a good credit rating with staying out of credit card debt.  Open one credit card account and charge regular expenses on the card ensuring the monthly balance is paid off in full and on time.

-Understand what you can afford on your starting salary and be careful not to overspend on the latest gadgets such as phone, computer, or other electronics. 

-Start saving for something that you want to buy such as a car, house, or vacation using a money market account.

-Since you are a graduate and you are relatively young, make sure you budget in vacation, travel, and fun things that you like to do.  You will want to ensure that you take care of yourself by doing fun activities for mental and physical health reasons.

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