Financial Advice for Graduates.

It’s that time of year again: graduation season! I received a reminder today from the University of Denver (where I teach) Chancellor’s Office to save the date for our commencement exercises coming up in a couple of week.  It’s an exciting time that also brings along its fair share of stress and anxiety. However, as young professionals entering the workforce, it’s extremely important to make a plan and stick with it. It’s never too late to start planning for the future, especially because success, both personally and financially, requires time and dedication. Even though adulting can be difficult, it doesn’t have to be. Planning ahead and getting things in line brings personal confidence,resulting in financial freedom. If you don’t know where to start, you’re not alone. Luckily, getting started is easy; just follow these 4 tips.

Open a Credit Card Account: If you are a recent graduate, employed, and don’t have a credit card already, you should get one. However, If you don’t already have a savings and checking account, you’ll need to establish one before applying for a credit card. The goal of a credit card is not to have unlimited spending, but instead to help you establish a line of credit, credit history, and eventually a credit score, all of which are used to determine fiscal responsibility before lending. Although you may already have an open student loan account, revolving credit, like that of a credit card, shows lenders an individual is able to borrow and repay money responsibly. Using a credit card, paying the bill on time, and paying more than the minimum payment translates to the lender as trust in the borrower, and gets reflected in both your credit score and credit limit. The higher your credit score, the more likely you’ll get approved for a lager credit limit; that is, however, if you’ve already established a credit history. First-time cardholders rarely receive more than a $500 – $1,000 limit, therefore, the sooner you start establishing credit, the sooner you’ll be approved for a loan or mortgage.

Save for the Present and Future: As an adult, you’ll have things you want to save for and thing you need to save for, so prioritization is key. Below are the steps you should be taking to prepare your savings for adulting.

Set Aside 20%– Do your best to save 20% of your monthly income. If this is not possible, assess what you can afford to save based on your fixed expenses, and set up an automatic deposit to transfer funds.

Prepare for Loan Payments– Take advantage of your grace period, but prepare for the bills to start rolling in. A mini-audit of your personal finances will help you determine if your monthly payments are reasonable, or if you’ll need to refinance your student loans in order to reduce your monthly payments.

Enroll in an Insurance Plan– Never underestimate the cost of an emergency! Insurance is far beyond a convenience: it’s essential. With 643,000 Americans going bankrupt over medical debt alone, the road to financial freedom starts with protecting you, the driver.

Establish a Retirement Fund– Again, the sooner you start, the more you’ll have. Ask your employer about 401k options or, if that’s not an option, ask if they can point you to a trusted financial advisor.

Prepare for Future Housing Needs– Eventually, most professionals want to purchase a home of their own. However, the more you spend renting, the less capitol you’re likely to have when attempting to buy, unless you’ve been saving accordingly.

Practice Sustainable Spending: Aside from saving 20% of your monthly income, there are dozens of simple strategies you can use to track your spending and save money where it counts! For example, instead of renting, inquire about rent-to-own opportunities, choose public transportation over owning a vehicle, and consider the miscellaneous products you buy most often. In fact, home goods and textiles are a perfect example. Although fast-moving commercial goods and fast fashion products often cost less initially, higher-quality products last longer and are more economical and environmentally practical alternative. Conveniently, as a consumer, you have have options when it comes to sustainable clothing, household items, and even housing alternatives.

Be Prepared: A emergency, costing thousands of dollars, can happen at any moment. Prepare your present and future finances for a medical emergency, unexpected repairs, job loss, or even an extreme case where a data breach results in identity theftMy friends at ConsumerAffairs have produced a great article on how to check to see if you’ve been a victim of identify theft.  Although these can happen with little notice, following the 20% saving rule, and practicing sustainable spending can free up additional income that can make a difference. Preparing for the future requires a firm understanding of the present, so dig deep into your finances and budget, request a free credit report, and devise your emergency plan around them.

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