4 Money Musts for Recent College Grads | RKL LLP
Posted on: May 2nd, 2017

4 Money Musts for Recent College Grads

RKL Wealth Management offers four tips you can share with the recent college graduates in your life to help them start off on the right financial foot. It’s college graduation season, which means a new crop of young adults will transition from the dorm room to the conference room. This new phase of life offers many exciting opportunities, but it also brings new financial responsibilities like student loan repayment, taxes and more. As new grads navigate the uncharted waters of adulthood, here are some tips to start off on the right foot and pave the way for a successful financial future.

Build a budget and track expenses

As students, most young adults lived pretty frugally. As recent grads, keeping that frugal mindset is a huge advantage. This doesn’t mean sticking to the ramen noodle diet, but it does mean creating a budget and tracking expenses. Those new paychecks may be tempting to spend, but living within your means and spending money intentionally sets the financial foundation for young adults to tackle other financial challenges, like student debt. There are a number of budgeting and expense tracking apps that can help with this process.

Start saving for retirement

For recent grads who consider making weekend plans a long-term commitment, retirement can definitely seem like a remote and distant concept. Thanks to the power of compounding interest, however, saving early and often pays off exponentially down the line. Many employers auto-enroll their employees in a retirement plan, but if yours does not, make sure to sign up on your own. When setting a contribution amount, try to reach any employer match limits. Otherwise, you’re leaving free money on the table, so it is definitely worth skipping a few dinners with friends to find room in your budget. Most importantly, avoid taking this money out early and use caution if you are considering it, because it could have major tax implications and can hurt future investment potential.

Set up an emergency fund

Despite the best budgeting intentions, unexpected or emergency expenses do happen. Young adults can prepare to absorb these financial blows by setting up an emergency fund. This should be a dedicated item in your budget, and be sure to keep this money separate from other savings or checking accounts so it is not spent until absolutely necessary. The ideal emergency fund should be approximately six times your monthly income, but for now, starting small can save your bank account or credit card from the aftermath of car troubles or unexpectedly high medical bills.

 Manage debt wisely

Few students make it through higher education without student debt, and those bills come due not long after graduation. Income-based repayment, which links monthly loan payments to income, not total debt, is one way to manage debt payments. Young adults with numerous loans should explore consolidation for convenience and potentially lower payments. With student loan obligations hanging over them, recent grads should proceed with caution when it comes to taking on other consumer debt. It’s all too easy to rack up credit card debt furnishing a new apartment or adding to your debt load with a loan for a new car. Stick to your budget and develop a plan to set aside the funds for these purchases.

The transition from college to the working world can be daunting, but following these steps can help recent grads form good financial habits that will pay dividends throughout their lifetimes.

Visit rklwealth.com to learn about all the ways the financial planning team at RKL Wealth Management helps individuals and families invest achieve their unique goals.

 

Thomas D. Reardon, CFP®, Wealth Advisor for RKL Wealth ManagementContributed by Thomas D. Reardon, CFP®, Wealth Advisor with RKL Wealth Management. Tom is responsible for creating and implementing customized financial plans for clients and their families. He specializes in helping clients identify and prioritize their goals for retirement, educational funding and estate planning.

 

 

 

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One response to “4 Money Musts for Recent College Grads”

  1. Mary Ann R says:

    Sound advice from your CFP. Wish more young college grads would take advantage of this advice and meet with Mr. Reardon to see how best to start saving and consolidate debt. Thank you for this information!

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