Helping Recent College Graduates Reach Financial Success
Here’s how you can help your new college graduate build a solid financial future.
Assist them in developing a student loan management plan. Help your children “organize their student loans so they know when the monthly payments start, the amount due for each loan, the name and contact information for the service provider and the interest rates,” says Joe DePaulo, CEO of a private student loan company. This way, “they don’t accidentally pay late or miss any payments entirely,” he says.
Book time with an adviser. Feel like your advice is falling on deaf ears? Pay for a one- to two-hour consultation. “Objective financial advice is invaluable,” says Ryder Taff, a financial adviser. To find an adviser, ask other professionals, says Taff. “Attorneys, CPAs and bankers typically have a good relationship with an adviser they trust.” Also, the Certified Financial Planner Board of Standards has a search tool to find advisers.
Save at least 20%-25% of your paycheck. And then blow the rest having as much fun as you can. Seriously, while it’s important to save as much money as possible if you can hit that 20-25% mark you will be golden. You can spend guilt-free knowing that you are saving more than 99% of people and getting a massive head start on building wealth. Try to escape living paycheck to paycheck as quickly as possible. For more info here’s a deeper dive into how much money you should save.
Saving is essential; budgeting, not so much. One of life’s immutable truths is that to have true financial security you have to save. We all should have a cushion of three to six months’ worth of living expenses in a bank savings account that we can tap for emergencies or periods between jobs. And we also need to build a nest egg over the course of our careers if we want to maintain an acceptable standard of living in retirement after the paychecks stop. (Yes, I know retirement seems like a far-off mirage at the moment. But, believe me, it creeps up faster than you’d think.)
Keep learning new skills. Just because you are done with school doesn’t mean the learning stops. If you want to really make more money, the learning is just beginning. Book smarts + Street Smarts + Skills = $$ Learn as many of the skills that will be most in-demand in the future as you can. Opportunities are created through connections and selling the skills you have. It’s never been easier in history to learn almost anything for free online. Take advantage and learn at least 2 new skills each month. Don’t get stuck in a rut and no, you don’t need to go back to school to learn the skills required to get many jobs. Focus your time on both learning AND doing. When you learn through experience you can learn at least twice as much twice as fast.
Determine your first priority. Do you have student loan debt? Do you have a car payment? Do you want to travel and have adventures? Do you plan to get married and have a family? In other words, what are your goals? Determine what’s most important to you, in order of when you expect these life events to happen. Entrepreneur.com says then prioritize these goals and create a financial plan for how to accomplish them. If you plan on paying down debt, it’s time to cut back spending and increase your income as much as possible. Consider taking on freelance work or a part-time job on the weekends. If you want to become a digital nomad and travel the world, you’ll have to create a plan to sell your belongings, save up money, and prepare to live in different countries. Make your goals a priority and create a plan to pursue them.
Don’t wait for the perfect job. It probably won’t come quickly, if at all. Too many people wait on the sideline for their big break. Instead get in the game, create, networking, and get a job as close, or as near, as possible to the one you want. So, for example, if you want to be a screenwriter, start writing as much as you can and get a job at an agency or studio. If you can’t get a job at an agency, get a part-time job at a restaurant where screenwriters are known to hang out. US News recommends that you then move to the city where the job is you want and start making connections. A vast majority of life’s opportunities come through personal connections, not applying to a job posting you found online. Most job searches are rigged, so find a way to get in the side door.
Lead by example. “In addition to having honest conversations around money, take the actions that you want your child to see,” says Ashley Feinstein Gerstley, a certified life coach specializing in personal finance. “When our children see us dedicate time to our personal finances, they pick up that it’s a priority.”
Keep investments simple. Investing usually comes off as a complicated and confusing topic, which turns many of us off to taking steps down that path. But don’t let this barrier stop you. Keep your investing strategy simple and only put your money into retirement vehicles if it makes sense. Don’t worry about stock market trading, or staying up on the latest economic news. Simply sign up for your employer’s 401K, or open a Roth IRA or CD at your local bank and start putting small chunks of money away every month. Diversification is important, but you don’t want it to get overly complicated. Keep it sweet and simple until you get comfortable with investing basics.
Know how much you can help. Before making any financial commitments to help out, first “calculate how much support you can provide without undermining your financial or retirement goal,” says Mike Berry, a certified financial planner.