Congrats! You’ve taken that extra step to higher education, and now it’s time to walk across the stage and step out into the world. Whether you’ve landed your first job or have taken steps to further your education, it’s time to start putting some financial habits into place. This might not be the cold hard cash reward you were hoping for as congratulations on your achievement, but we think these three financial tips are the only gems you’ll need to ace your finances.
Stay focused by setting these goals – you can shift priorities but always keep these in mind.
- Save for retirement
- Create an emergency fund
- Pay down debt
Which goal matters more to you depends on where you are in life. We put retirement on the list first because we know that while you just graduated, retirement is decades away, but you should be thinking about it now. Often many who want to retire don’t have the finances to do so, and we want to prevent that from happening to you.
Retirement
You want to start saving for retirement now, contributing as much as you can every month in an employer-sponsored 401(k) plan or an IRA. Even if it’s just $10! It might not seem like much, but thanks to compound interest, $10 a month now can be worth more than $100 a month a decade from now. Want to learn more about which retirement plan is right for you? Here’s The Difference Between IRAs and 401(k)s.
Emergency Fund
Emergencies will come up – that’s life and we can’t prevent that. But, what we can prevent is how we prepare for them. The last thing you want is to have to tap into your savings or worse, having to get a credit card, when an emergency occurs, which is where an emergency fund comes in handy. A general rule of thumb is to work towards putting aside money equivalent to three to six months of living expenses, and you should make this a personal goal.
Repay Debt
First stop to paying off debt is to know how much you owe. It can be downright scary to find out how much you really owe, but you have to know so that you take the right steps to pay them off and live debt free. Focus on the smallest loan first using what is commonly referred to as the debt snowball method. Here’s how it works:
- Make the minimum payments on all of your debts except the smallest one
- Pay as much as you can on the small one until it is completely paid off
- Then, you take the money you were paying on the small loan and pay it towards the next debt.
Get it? This gives you the incentive, satisfaction, and motivation to continue towards a debt-free life by paying off your loans one-by-one. If you only have one loan, make the minimum payments every time. If finances allow, pay a little more than the minimum. Even an additional $10 to your loan can help.
After you’ve started working for a few months and have gotten used to the amount of take-home money you have (after taxes) earned, you can figure out how much money you can afford to put aside for retirement, for emergencies, and towards re-paying debt. We confess – it may be intimidating at first, but our Member Advisors can help you review your financial situation and create a budget that will work for you. Visit our Montebello or Cerritos branch today!