As graduation day gets closer many college grads will be looking for their first ‘real’ job and setting out on their own financial path. But here’s the thing; many of the basic concepts about finances, credit scores, IRAs and much more were never taught to them in school. For many, that will lead to trouble ahead, financially-speaking.
This blog aims to correct this large college oversight. Enjoy!
First and foremost, start saving for retirement NOW. Yes, retirement seems like a million years away. It’s not. In fact, if you work for 40 years, it’s only 14,600 days away. That’s not as long as you might think, meaning that, if you want to be financially prepared when retirement arrives, you’ve got to start planning for it today. The power of compound interest is the best reason why.
What’s compound interest? Simply the easiest way to use time and your own money to your advantage, and make more money without having to do anything but wait. (If you need a more in-depth explanation, Google it.) The only way to take advantage of compound interest is to start putting money into an IRA, 401(k) or other investment or retirement account NOW, where it can start to do its magic.
Create a budget and stick to it starting TODAY. It’s likely that, throughout college, you had no budget whatsoever and lived hand-to-mouth or paycheck-to-paycheck. While you can survive for four years in college that way, it’s much more difficult to do the same in real life. In order to truly keep your finances in order you need to know what’s coming in, what’s going out, and be able to keep the latter number lower than the former. Creating and sticking to a budget is also the best way to build wealth.
Speaking of building wealth, it will be much easier if you get out from under your college loan debt quickly, so pay that off as fast as you possibly can. Even if that means scrimping for a few years, picking up an extra side job or living at home with mom and dad for a couple of extra years, do it. In the long run, paying your student debt down as quickly as possible will allow you to not only save thousands of dollars but also increase your wealth significantly.
Finally, even though you’ve just finished four years (or maybe longer) of education, continue to educate yourself about finances on a continuous basis. Talk to the people in the finance department at your first job, speak to older adults who have a good handle on their finances or simply do some online research occasionally. The education you receive will, in many ways, be even more valuable then the college degree you now have.
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