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Educational Resources

By Edward “Ed” V. O’Neal, Senior Vice President and Manager, Retirement Plans

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For those who have recently graduated from college – or may be on the verge of doing so – this experience marks a monumental time in your life. The possibilities are unlimited, and the excitement is intoxicating. For most young adults, college graduation is the start of a major transition into adulthood and the prospect of employment in the “real world.” College students will enter the work force armed with degrees and knowledge ranging from computer science and physics, to psychology and history, but how many will possess the skillset to effectively manage their finances and create healthy savings habits?

Admittedly, these issues often seem to be subordinate to other perceived priorities with new graduates, including housing or rent expenses, student loan payments and determining how much income remains for takeout food and entertainment. But starting the process of building personal finance and savings skills is a major part of “adulting” and can have significant long-term financial rewards. Although there’s never a shortage of financial advice floating around the internet universe, below are a few simple, common-sense tips that might help you create a good financial foundation as you navigate the world post- graduation:

  1. Get into the habit of budgeting – I’ve listed this strategy first because it can serve as the catalyst for developing a lifetime of good financial and savings habits. Until you have some knowledge and control over how much money is coming in and going out, it will be difficult to enact many effective financial strategies. According to a recent survey, a majority of Americans have no idea how much they’ve spent in the last month, including only 23% of Gen Z and 27% of Millenials.* Sometimes one of the biggest challenges as a new graduate is getting over the stigma of budgeting. Instead of thinking about it as an exercise in living within your means, perhaps it’s easier to think of a budget as a spending plan designed to guide your spending and saving habits so that you can obtain some of the things you want while also building good savings and financial skills.
  2. Start saving now and make it a priority – Creating a financial and savings plan – or budget – is only part of the process, often the more challenging part is the execution of it. No matter the size of your income, chances are you can afford to save something. The amount of the savings is less important than building the discipline of saving. Set an initial goal of saving between three to six months’ worth of living expenses as an emergency fund in the event of unexpected financial turbulence, such as significant car repairs or job loss.
  3. Start thinking about retirement – This might be one of the most difficult financial and savings concepts for you to wrap your head around as a new college graduate. It may feel like you have plenty of time before you need to seriously consider this issue. In actuality, time can often be your best friend as you begin to save for retirement. If you have access to an employer-sponsored retirement plan, like a 401(k), you should strongly consider participating to take advantage of the compounding returns and tax benefits. Retirement plans provide a good and easy way to start saving since the contributions are deducted directly from the paycheck. If you don’t have access to an employer-sponsored retirement plan, saving through an IRA (traditional or Roth) can also provide a retirement savings vehicle that benefits from compounding interest and tax advantages.

Entering the “real world” as a graduate can be both overwhelming and exciting, but you can set yourself up with a strong financial foundation by learning and implementing some very basic financial strategies now.

Benjamin F. Edwards does not provide tax advice; therefore, it is also important to consult with your tax professional for additional guidance tailored to your specific situation.

 

*Intuit. “Survey: 65% of Americans Have No Idea How Much They Spent Last Month”