Financial Advice for Recent College Grads

While Forbes suggests that recent college graduates read a limited amount of books on financial smarts, not every graduate who has just completed four or more years of higher education is going to be interested in more reading. Instead, those individuals might prefer some insightful advice to help them manage their finances as they take their first steps into the world as independent individuals for the first time.

Establish Credit Responsibly
US News & World Report found that those most prone to identity theft and poor credit are not seniors, but rather recent college graduates or current students. This is largely in part because of the substantial online profile millennials have that exposes them to the actions of unscrupulous individuals.

You should start by not only monitoring your credit, but establishing a positive credit trend. This means taking on a car payment, credit card, or bank loan (avoid all three if your means require) and making regular payments on that debt. It is not crucial to clear that debt quickly, so much as it is to establish a trend of paying your debts on time.

Live Within Your Means
Everyone wants a house, car, and a flat screen TV with all the latest smart devices, but wanting and affording are two completely different concepts. Make a budget for yourself and make sure that you have enough money set aside each month to cover your important bills, such as; rent/mortgage, utilities, car payment, and grocery bills. Only after those expenses are accounted for should you consider extending your budget for extra things, such as entertainment and materialistic items.

If need be, choose your friends wisely. Just because they have money or a lack of concern for their financial future does not mean you have to be dragged down in debt alongside them. If you feel the need to splurge at times, try to spend your money on experiences you can truly enjoy rather than a bigger flat screen or other material items.

Save, Save, SAVE!
Time magazine emphasizes the importance of saving when you are young. If you do not have a retirement plan available from your current employer, consider opening a Roth IRA. As of 2015 you can invest $5,500 maximum each year into these accounts and enjoy decades of tax-free growth. Even if you do have an employer-funded plan, it is never a bad idea to set aside even more money.

On top of that, set up automated payments into your personal savings account so you can build up a nest egg to cover you in the event of a medical emergency, job loss, or other unforeseen financial issues. This way you have money that is liquid which can be used immediately to take care of these types of financial emergencies.

Take Advantage of 401(k) Plans
Assuming your employer has a 401(k) plan, do not skip out of it. These plans are often matching on the part of employers, which means for every dollar you put in to your account (to a point), your employer will kick in a percentage of that to help you further build a nest egg for your retirement. Most importantly, avoid the temptation to take early withdrawals from this account. Someday, decades from now, you will need this money to live on from month to month.

Just a few simple steps is all it takes to set yourself on a good financial foundation now, one which you can build your life upon for decades to come. For more financial advice, contact Manhattan Ridge Advisors.