Expert Q&A

What are some good financial planning tips for recent college graduates?


Related Topics: Financial Planning, Debt and Credit, Saving
Related Tags: Recent Graduate, Recent Graduate
Dennis Cherenkov
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By Dennis Cherenkov - Primerica Financial Services
Answered almost 3 years ago

Congratulations on finishing school.

Here are some steps that I definitely recommend you take…
1st. Get a small $1k emergency fund started, that way if an “emergency” occurs you will not to need to go into debt as much.
2nd. Start paying off debt (except the mortgage if you got one) intensely using the debt snowball method. It does not make much sense to invest yet, especially when you have “guaranteed” debt say at 18%+ on credit cards and the true investments are not guaranteed.
3rd. Establish a “fully funded emergency fund” which is 3 to 6 months of your income. This will be powerful once established because this money not only will be a piece of mind but it will totally change the financial plan as a whole. For example regardless of what some salesperson says you will not need a short term disability policy, if it makes mathematical sense you will be able to accept some higher deductibles on insurance in exchange for lower premiums, and so on.
4th. Once debt-free and on financially solid ground now you can start to invest seriously, about 15% of income towards good mutual funds for retirement and other goals. While of course paying off the mortgage if you have one.
There are more steps to the process of building wealth but I am sure once you are on track, there will be plenty of salespeople trying to “help” you. :)

I highly recommend Dave Ramsey’s Financial Peace University course (more info at http://www.daveramsey.com/fpu)

Let me know if this was helpful. Thanks

-Dennis
www.dennischerenkov.com

Justin R. Poore
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By Justin R. Poore - JP Advising w/ Sammons Securities
Answered about 2 years ago

Congratulations!

A lot of planners focus on what you should do, and not how to actually do it. Having worked with many college graduates, and starting this profession out of college myself, here are some value “How To’s”

1) Stop buying drinks when you go out to eat! They cost $2.5 every time, and water is free. Typically college grads spend close to $30 a month in soda. Take that $30 savings put it in an on-line savings account like ING where it automatically comes out from your checking per month, and you can watch it grow!

2) Keep your cell phone for a few years. Many people, not just college grads, want the latest and greatest! Keeping you cell phone for two years can save you as little as $200 a year on top of plan charges. Check your carriers for discounts when you get your new job, and watch your bill to see if you can reduce cost based on usage. Typically there is another $10 you can save per month there.

3) Claim ZERO on your tax W-4 at your employer. This is basically a forced savings to the government. You will be withholding more of your money per pay check and can get quite a bit of it back when you go to file taxes. At that time, you will have a lump sum to be used for retirement savings, car payoff’s, bill payoff’s, savings, or if you played your cards right, a small trip.

4) Eliminate the Car loan – OR – keep the car you have. Too many people get a new job and run out to buy the new car. This comes witha pricey interest rate for college kids with little credit history – sometimes upwards of 7%. drive the car you have, eliminate the loan payment and then start to pocket that monthly for a little while. Once you have that savings – then adjust for looking at the car you really want to drive versus just something new.

Those are just a few items to help you understand the How’s of What you should do.

All the Best!

Trevor Leffingwell
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By Trevor Leffingwell - Town & Country Insurance Agency
Answered over 2 years ago

Congratulations on your recent graduation! This is a milestone that you should be proud of. A college degree has a proven track record for increasing the amount of money you’ll earn over your lifetime.

More than anything, you need to learn about the compounding of numbers, and how credit and bill-paying can be used to your advantage. Please stay away from using those credit cards that were “just for emergencies”, and use them only whenever absolutely needed. This is the time when you need to start putting away cash and keeping your debt at a very minimum. You need to immediately put away at least 10% of your paychecks for emergencies, and start looking at ways to maximze 401K contributions at work. Retirement may seem 50 years away, but that time will soon fly by!

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