With the class of 2016 graduated from college, here are my top three financial planning tips for college graduates (and a bonus for those who have student loans.)
Create an Emergency Fund
No matter if you just graduated with your undergraduate, graduate or Ph.D. degree, you need to have an emergency fund. Some experts say to save $1,000, while others say to save three to six month worth of expenses.
Life happens and you’ll need to have some funds set aside when those emergencies happen. Pick a number that you feel comfortable with and make a plan to set that money aside
Sign up for your employer’s retirement plan ASAP
Whether you’re working for a small or large company, make sure to take advantage of your employer’s retirement plan. Be sure to ask your human resources office when you can start contributing. Is it starting with your first paycheck or six months into your job? Find out.
Saving for retirement is important. Plus most employers match your contributions up to a certain dollar amount or percentage; take advantage of that free money.
If you’re working part time, look into a Roth IRA.
If you’re starting your own small business, start small (possibly with a Roth IRA) but look into options with a financial planner or retirement plan administrator who can help you set up your retirement plan for you and your employees. Remember, no one is saving for you but you.
Build a Good Credit History
Some graduates may already have an established credit history and that’s great. But if you’ve never applied for credit before (car, credit card, etc.) you may want to look into a secured credit card.
A secured credit card is what it sounds like; you have to secure the card with some money up front in order to have a credit line.
After a year (or so) you can apply for an unsecured credit card.
When working on building a good credit history, you need to pay on time and in full (or at least more than the minimum payment) each and every month. You’ll need good credit later to purchase a car, your first home and qualify for things like insurance and utilities.
Don’t forget to check your credit on an annual basis. If you never check you’re credit, you won’t know if you have a good history or not, so take advantage of www.annualcreditreport.com (the only free website) and make sure you’re making good progress.
Student Loan Repayment
If you have student loans to repay, make sure you sign up for the repayment plan that best suits your needs. If you don’t choose one of the eight plans – you’ll go into the standard repayment. (Which may or may not be the best fit for you.)
If you do happen to run into an issue where you can’t pay, contact your loan servicer before you miss a payment.
While this list doesn’t encompass all of the financial events you will have in your life, it’s a good list to get you started. Don’t forget to fund your emergency fund, save for your future retirement and start building good credit habits.
If you are going to be repaying student loans, pick the plan that’s best for you.
— Top financial tips for new college graduates —