Do’s and Dont’s for Recent College Graduates

We’d like to extend a big congratulations to all those who will be graduating in the coming months. For upcoming college grads, the notion of entering the “real world” can feel equally exciting and ambiguous. The reality of becoming financially independent means accepting a deepened responsibility for how you choose to manage your money and pursue a sustainable lifestyle. While you may never feel “ready” to take on this big responsibility, being aware of the positive and negative habits can help you build your financial foundation and be more comfortable in determining what your path looks like going forward.

For those embarking on this new chapter of their financial journey, we share a few do’s and don’ts of personal finance that may be helpful for ensuring your career starts off on the right foot:

DO’S:

• Create a Budget
  • Creating a budget can sometimes feel overwhelming. However it is one of the most important things to do when starting your own financial life. A budget not only tracks financial inflows and outflows, but can also be used as a starting point to create policies that you can fall back on when making financial decisions. Providing limits on what you can spend may take some of the temptation away for those “extra” purchases.
• Take Advantage of Your Employer Provided Benefits
  • Employer provided benefits offer a low cost option for insurance benefits. You may only select your benefits during the enrollment period and sometimes the language can be confusing; take advantage of your human resource department if you have any questions! Additionally, it is also a beneficial practice to direct a certain percentage of your paycheck to your employer provided retirement plan. This is a tax-advantaged way of saving for retirement and it encourages you to save money before it even reaches your bank account. If your employer provides a percentage match on contributions, take advantage of “free money” by contributing at least that percentage.
• Build an Emergency Fund
  • An emergency fund is used for exactly what it sounds like: an emergency! The purpose of an emergency fund is to have an amount of fixed expenses set aside that will allow you to continue your lifestyle if you lose your job or something happens unexpectedly that impacts your finances. Ideally, this fund will have enough money to cover your expenses should something come up that requires you to look for a new job or have to pay off an unexpected financial outlay.

DON’TS:

• Take on Too Much Debt
  • It can be very enticing to purchase a brand new car or splurge on materialistic goods when you experience a salary for the first time. While it may be difficult to ignore these flashy goods, it is important to stick to your budget and not accrue unnecessary.
• Develop Bad Money Habits
  • Developing bad money habits early on in your career, while seemingly sustainable in the present, can have drastic effects on the future of your finances. Bad habits include not creating a budget, spending before saving, avoiding financial education, living above your means, etc. Bad habits are hard to break and therefore it is important that you build your foundation on positive ones at an early age.
• Wait to Save and Invest
  • It can be easy to fall into the mentality that “there is plenty of time to save,” but this mindset can be very detrimental to the future of your finances. Saving at a young age provides more time for returns to compound, allowing your account value to grow at a faster rate in the future. Alternatively, waiting to save until you are older will require saving more to make up for the returns you are missing out on by delaying.

These are just a few of the do’s and don’ts that can help recent college graduates build a solid financial foundation. At Yeske Buie, we are invested in the financial success of our Clients’ entire family and are always willing to sit down with your recent college graduates if they would like to discuss their new financial independence further. Please do not hesitate to reach out to us with any questions you may have!