If you’re among the many recent college graduates, you’re likely thinking about your future. You may even have a pretty impressive list of things you plan to do, like buying a car, taking a fabulous trip abroad or buying your first house. Your list may include dozens of adventures and treats, as reward for excelling in school and now being done. While rewards may certainly be in order, one of the best things you can do is make the decision to set a strong financial foundation beneath you, a solid place from which to build a successful life.
Here are 4 financial tips for college graduates that can make a huge difference in your financial future.
Time is your friend right now.
Time is on your side, and time is a tremendous asset to your financial future. If you get pro-active about your financial health now, you’ll have more time for your savings to build, and more time for compound interest to take even the smallest contributions to your retirement savings and make them much bigger. If you opt to procrastinate on addressing your financial groundwork, time turns into a liability. You won’t get as much of a financial catapult as other college grads who do start on their financial strength-building now.
We know, a third vacation this summer sounds much more exciting than putting money away for your retirement fund. You’re likely not thinking about retirement now. And you may be looking at some hefty college loans to pay back. “Shouldn’t I take care of that first?” you might ask. Our answers is: Of course you should pay back your college loans on time. You’ll just start your retirement savings now, even if it’s just $10 a month while you’re paying down your college loans. That money builds, compound interest will multiply it, and you’ll be on your way to a smarter financial future.
Just like college or grad school required focus in multiple areas, so too does the best financial planning for college grads. (Meaning, you’re not done with just a $10 auto-pay to a savings account, although we applaud you for that smart step.) Creating your strong financial future includes a few additional, essential steps:
Learn to live within your means.
You’ve heard this before, when you were younger, perhaps advice given to you by your parents. And when you were younger, ‘living within your means’ meant making sure your paycheck or the allowance your parents gave you lasted the week. And that was fine advice for when you were in college.
Now, living within your means has a far more significant impact: you want to avoid credit card problems. If you were to get trapped beneath a large amount of debt on your credit cards, it can be tremendously difficult to dig yourself out when you have adult expenses to handle, like rent or a mortgage, car payments and other big expenditures.
Credit card debt has a domino effect. It can take you years to pay off high credit card debt, and mishandling your credit cards can damage or destroy your credit rating. Bad credit can make it impossible or very expensive to buy that car or that house when you’re ready. So make a plan to pay down your credit cards, and avoid getting dependent on them to pay your bills.
And yes, another part of living within your means is learning to make and stick to a budget. Your financial advisor can work with you on that, since a professional knows about hidden budget topics that you may not find on budget worksheets online or in books. After an initial period of adjusting to living within your means, it will eventually become more natural to you.
Become a lifelong learner.
Even though college is done, there is plenty more learning to do, specifically on the financial world in which you live. Stay on top of financial news, and learn all you can from your financial planner about how to handle shifts in the economy. Recessions happen. Global markets fluctuate. You need to be a savvy protector of your assets, and learn not to react emotionally when the financial market has a bad day or the economy flounders for a while. Learning about financial history and financial management will only serve you well as you build a strong and better future for yourself and for the family you may someday have.
Choose your friends wisely.
Socializing with or dating people who don’t have the same financial values as you can affect how well you invest in your financial future. These people, especially the person you choose to marry are very likely to impact your views on money and how to build your financial future.
When it comes to marriage, this person needs to share your same goals and join you in envisioning a strong and healthy life. In addition to drains on your savings if your partner is irresponsible with money, divorce is one of the biggest risks to your financial status. It can take years to recover financially from a divorce, and some people never recover. The result: financial disaster. You will have worked too hard for too long to risk your financial strength and freedom.
So choose your partner wisely as that choice dictates happiness and well-being in all areas of your life, but has an especially big impact on your finances.
So although you may not be thinking of your future needs, if you plan wisely now, you’ll be less likely to sift through the wreckage of your formerly great life and wondering why you didn’t plan better.
Listen to our discussion on the Financial Focus for more details on these 4 financial tips for college graduates to embark on your healthy financial future. And even if you’re approaching graduation this is important news for you as well. Imagine getting an extra year’s jump on your post-graduation financial strength-building!