There is no better feeling than officially completing school. I finished my master’s degree and my CPA exams a few summers ago and thought to myself, “I can’t believe I never have to take another test again!” Little did I know, I would transition to the financial planning industry and have the SIE, Series 7/66 exams, the CFP® professional exam, and insurance exams waiting for me… ha! But for most, the end of college marks the beginning of a new stage in life: beginning a career and building the financial foundation you will have the remainder of your life. Let’s review a few decisions you can make now that can have a positive impact on your finances for the rest of your life!
- Live on less than you make, starting now – This is one of the most important, foundational aspects of good stewardship over your finances. If you come out of school, making $50,000/year and can live off $40,000 or $45,000 while saving the rest, then you are building habitual practices that will carry forward. If you can build the discipline to live off less than you make now, then when your income is higher, it will be easier to save that money. I often hear “I’ll save money once I make more,” but it’s easier said than done. Building good financial habits starts now!
- Save money – Once you get the first principle down, you will be able to save money easily. When you are living off less than you make, the surplus you have each month can easily be saved. What’s the best practice to make this happen? At the start of every month, pay yourself first. What this means is, transfer money into savings and then work the rest of your budget for the month. This way, you have your savings taken care of, and you can freely spend the remainder of your income the rest of the month.
- If you have student loans, develop a plan to pay them off – Student loans are a big issue in this country, there’s no denying that. They’re hanging over the heads of so many graduating students. So, if you have student loans, at least work on a plan to pay them off over a certain amount of time and stick to it! Pay off your highest interest rate loans first and work your way down the list. If you have an employer that has agreed to pay them off after a certain number of years working, that potentially changes the situation. Have a detailed discussion with someone on our team and we can walk through what’s best!
- If your employer offers a 401(k) with a match, TAKE IT – Seriously, it’s free money. Most employers offer a match (g., if you put 3% of your paycheck in your 401(k), your employer matches your contribution). Even if you don’t plan on staying at your employer forever, still take it. It’s a 100% rate of return. You put in $10, you get $20, instantly doubling your money. There’s not a single investment product out there that can offer the same type of returns.
- Begin building your credit with a starter credit card – There’s no hiding the fact that the entire world revolves around credit. Can misuse of credit cards come back to bite you? You bet. But credit cards are an excellent way to start building your credit and eventually build up nice rewards. I personally opened a student credit card while I was in school and all I put on it was gas each month, a couple hundred dollars, and then immediately paid it off. It’s a great way to responsibly build your credit!
These are some of the most foundational practices I can think of for those starting life after school. None of the above are a way to “get rich quick,” but they all build upon one another and can lead to financial success throughout your life if you stick with it. Of course, we would be happy to help you walk through any of the above, so please reach out.
Opinions expressed are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.