’Tis the season of graduations, commencement speeches, and advice for a happy and productive life. As a financial advisor, the mom of a recent grad school graduate, and with another child heading into their senior year of college, I’ve been thinking about words of wisdom I’d impart to young adults heading into the “real world.” If you’re a recent graduate of high school, college or grad school, consider these recommendations to set yourself up for a successful financial future.
See financial health as wealth. Take care of your financial well-being like you would your body. You work hard, eat right, go to the gym and maintain a social network. Your financial health should be tended to and nurtured as well. Think of your finances as another aspect of self-care and a fundamental component of your overall well-being.
Save like it matters. One thing people of all generations have in common is that we all want a secure and financially healthy retirement. Lately, I’ve been impressed with the Millennials and young adults in my world who prioritize saving for the future. Recently, my son’s friend asked if I would review his 401(k) choices and my daughter mentioned that she was looking forward to funding her Roth IRA with a sizeable portion of her summer internship check. Although it’s never too late to start saving, you are way ahead of the curve if you start early.
Know where it’s going. If you don’t know where you’re spending your money, it’s hard to manage it. Budgeting is about as alluring as dieting — it may be needed and will make you feel better if you do it, but it’s not always easy to start or stick with. Many online and financial institutions have free apps that can help, or a simple Excel spreadsheet could work for you too. Be sure to include line items to pay off your debts.
Pay off debt. Speaking of debt, student loans surpassed $1.5 trillion this year. Yes, that’s up more than 160 percent over the past decade and is equal to more than 1.5 times credit card debt. Needless to say, a majority of you may have loans to pay, so paying them down consistently is a big priority.
Invest. Graduates, you are at the prime of your life when it comes to investing. Einstein once said that the eighth wonder of the world is compounding interest. In most cases, if you’re a recent graduate, you will be able to take advantage of compounding interest. Time is money and the younger you are, the more likely you’ll be able to save more over time.
Ask for help. Have a good understanding of your financial goals and what it will to take to get there. If you don’t have a financial advisor to help you begin the process, start with your human resources department. Understand your work benefits: Do you have a HSA (Health Savings Account), and the ability to purchase long- or short-term disability? When you set up your 401(k) or 403(b), put away as much as you reasonably can into your retirement account. I’d also encourage you put a small amount away into a taxable account so that you will have additional money that will grow as you build your nest egg.
Having a goal and a plan to reach it will help lead you along the path to a stable financial future and a secure retirement. Congratulations to the graduates! You’ve worked hard and deserve to be recognized for your achievement. May you live in health, wealth and happiness.
Photo by Eric Ward
Lisa Taranto Schiffer
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