And so you have it: college is over and you have a real job. Welcome to the sometimes appealing and sometimes downhill spiral that is post-grad life. Fortunately, your first paycheck is on its way and you still know how to live on the budget of a college student. This is the most important time to take care of your finances, here’s what comes first:
- Emergency Fund – Because we all need new stuff at some point
Take your paycheck to relax and enjoy having money for the first time. Buy a steak, go to Vegas, buy something other than Natural Light, whatever you want – enjoy life. Take your next few paychecks to make an emergency fund with 3-6 months of expenses saved in there. It’s like a cash backstop – if you get into trouble you’ll have something for protection.
- Credit Card Conundrum
Credit Cards are the worst thing that you shouldn’t live without. Interest rates are jumping between 20-25%. If you have high credit card debt, then you’re losing money way faster than you think and its killing your cash accounts. Pay it down, in full, as soon as possible. On the complete opposite spectrum – if you don’t have a credit card, it may be time to get one. You might want to look at one with points attached so you can take advantage of what these cards are offering you – but read the fine print before making any decisions. Whether its travel miles, concierge services, or special deals – credit card companies are competing for your business so with proper research you may be able to find great deals. Oh credit cards; can’t live with them, can’t live without them.
- Protect the downside – We all need a Plan B
Youth is on your side – so lock in the rates provided to you for different types of insurance. Life insurance is important and inexpensive, especially if your parents might have cosigned for a loan or if you’re thinking about getting married. If you’re in a specialized profession (anything that requires more than a 4-year degree), then Disability Income Insurance is probably necessary as well. Over 25% of today’s 20 year old’s will become disabled in their lifetime, and your income is an easy thing to protect. 1
- Loan Refinance – You mean I could save how much?
People with a high paying profession – this one’s for you. Student loan companies love you. You’re pretty much guaranteed to pay them back with very low risk of defaulting. Because of this idea, you could qualify for a lower student loan rate. A 1% drop in your student loan interest rate could be a whole lot of money back in your pocket over time. At the very least, it’s worth checking out.
- Match the 401K – Take Whats Yours!
Our goal here is to not give away free money. If your company has a 401(k) match, put at least that amount in. A company match is the best deal going and every time you aren’t hitting the match you’re losing free money. There are a few things that financial people can’t give you – and an immediate 100% return on your money is one of them.
- Roth IRA – The Journey To Wealth
It’s not about how much money you make, but about how much you keep. I know you’ve heard of a Roth IRA and I promise, you hear about it for a reason. This is one of the best investment tool available when it comes starting your investment journey. If you follow the rules you will never pay tax on withdrawals – so all of those gains are yours to keep. You can also pull out whatever you contributed whenever you want, penalty-free. This is the one of most lucrative tools around and because of that there are some strict regulations. You can’t make too much or put over a certain amount in per year – so it’s important to talk to a professional early on to figure out what is best for you.
All of these concepts are designed to keep the most amount of money in your pocket throughout time. By taking advantage of tax benefits, low insurance costs, lower loan interest rates, and company matches – we save money to spend on the finer things in life. Building wealth is about utilizing the resources available to you and this list shows what these initial resources are and how to use them. Good luck on your journey.
Eric Croak is an Investment Advisor Representative with Creative Financial Partners in Perrysburg, Ohio. Recently, Eric has focused his efforts on helping professionals achieve financial stability through the use of education and planning. He is a trusted advisor for many professionals in the Toledo, Ohio area and continues to help new clients. He has his Series 7, Series 66 and his Life and Health Insurance Licenses. He can be contacted via email at email@example.com or through phone at 419.873.8500 ext. 1033.
Securities and investment advisory services offered solely through Ameritas Investment Corp. (AIC). Member FINRA/SIPC. AIC and Creative Financial Partners are not affiliated. Additional products and services may be available through Eric T Croak or Creative Financial Partners that are not offered by AIC