Congratulations, College Graduates!

7 Point Plan for the Real ‘Financial’ World

You’ve graduated from college– what a momentous occasion! With the flip of a tassel and toss of a mortarboard, you’ve officially made the passage from adolescence to adulthood. To help you make a smooth transition from college campus to the ‘real world’, please accept this gift—a blueprint for a solid financial start in life.

Make the most of your “total” compensation. Salary is a primary reward for a job well done. But it’s not the only form of pay. Equally important are benefits like health, life and disability insurance, retirement plans, and vacation time. Some companies go further and offer perks like continuing education, health club subsidies, and discounts on services or products, even company stock. Take the time to fully understand all benefits available to you and how they can enrich your life. To do anything less is to risk leaving money on the table. You’re way too smart for that.
Set up your financial house. While setting up your new crib, be sure to outfit your financial house. Start with the basics:

Checking account with convenient ATMs (to avoid “foreign ATM” fees).
Online bill payment; set up as many bills as possible on automatic pilot.
Text alerts to effortlessly track your bank balance.
Credit card in your name only, ideally with rewards that you care about—cash back, airline miles, etc.
Direct deposit of paycheck and reimbursements.
Secure filing system for important documents and bills. Start a file for tax information so you don’t have to dig around for paperwork when it’s time to file your taxes next April.
Paper shredder for safe disposal of sensitive info you don’t need to keep.

Spend about 25% of your pay on housing. Speaking of the new crib, you get to choose what you need and how much to spend. Decisions about homes can be emotionally charged and it can be easy to get carried away. Before signing the lease, think about your priorities. The more you spend on the roof over your head, the less you have for your social life, travel, hobbies and oh yeah, savings. And visa-versa. One rule of thumb is to spend about one-fourth of your gross pay on rent, parking and utilities (heat, electric, cable/internet).

Create a cash slush fund. If you’ve sailed through college, you may not believe that life can be difficult. Challenging and costly curve balls can and do come along in life, sometimes at the worst possible time. The best plan is to be ready with a stash of cash. Set money aside in a separate savings or money market account and label it “Emergency Exit Only”.

Save at least 15% of pay towards retirement. One unique advantage of being in your 20s is time– to save and invest for something that is priceless: your financial freedom. Start saving early and you can enjoy your life and career on your own terms; wait to save for retirement until you are in your 30s or later and you are destined to be a slave to your job, assuming the company still wants you in 35 years. If you dream of being master of your universe, start saving now for future freedom.

Keep investing in yourself and your skills. With the world and knowledge moving at light-speed, be committed to lifelong learning so that your skills stay relevant and cutting edge. Jump on every opportunity to develop your genius, so that you are as highly valued and sought-after talent as soccer’s Lionel Messi. Remember you are your #1 asset. How you choose to use your talents to create wealth is key to a successful financial future.

Nurture your relationships. Think of the many people who have supported your journey so far: your family, friends, professors, coaches, advisers, employers, and even the guy at your neighborhood coffee shop. They’ve cared about you and for you for years, and have a vested interest in your success and happiness. Don’t ditch them now that you’re moving on. Thank them. Stay in touch. You may need their help in the future. Who knows, maybe someday they will need you and give you the chance to return their kindness and support. Now that’s what the ‘real world’ is all about.

Celebrate your accomplishments thus far in life, and face the future with confidence that there’s more goodness to come. Plan well and live well!

karinMaloneyStifler Karin Maloney Stifler, CFP®, AIF®
President
True Wealth Advisors
Hudson, OH