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Graduation Season: Financial Tips for New College Graduates

May 20, 2024

Graduation Season: Financial Tips for New College Graduates

In a recent survey by Intelligent.com, "32 percent of college graduates have less than $5,000 in savings, 43 percent say they often or always live paycheck to paycheck, and 21 percent said they have credit card debt of more than $20,000."

These statistics underline the critical financial challenges new college graduates face as they step into the real world. With graduation season upon us, it's essential for these young adults to arm themselves with financial strategies that can pave the way for a secure and prosperous future.

So, if you or someone you know has recently graduated from college, here are a few practical financial tips to help you in several critical areas, from budgeting to investing.

Create a Budget

The foundation of financial independence is a well-structured budget. Start by cataloging your monthly income sources against your expenditures. Prioritize necessities like rent, utility bills, and groceries, and then allocate a portion of what remains towards savings. Tools like budgeting apps can simplify this process, offering insights into spending habits and areas for adjustment. Remember, a budget isn't static; revisit and tweak it as your financial situation evolves.

Build Credit 

Establishing a good credit score early on is essential for future financial activities, including renting an apartment, buying a car, or securing a mortgage. Start by applying for a credit card intended for beginners or a secured credit card if necessary. Practice good credit habits by making small purchases and paying the full balance each month. Monitoring your credit score will also help you understand how your financial decisions impact your creditworthiness.

Plan for Retirement

Though retirement might seem distant, starting early can significantly impact your financial security in later years. If your employer offers a 401(k) plan, contribute enough to qualify for matching funds, as this is essentially free money. Those without a 401(k) option should consider opening an Individual Retirement Account (IRA). Even modest contributions can grow substantially over time due to compound interest.

Start an Emergency Fund

Life is full of unforeseen challenges. An emergency fund is a financial safety net for unexpected expenses, such as medical bills or sudden job loss. Set a goal to save three to six months of living expenses in a readily accessible savings account. Begin with small, consistent contributions and gradually build your fund over time.

Eliminate Debt

High-interest debt, especially from credit cards, can hinder your financial growth. Focus on paying off these debts as quickly as possible, using strategies such as the snowball method (paying off smaller debts first) or the avalanche method (targeting debts with the highest interest rates). Eliminating these debts will free up more of your income for savings and investments.

Start Saving (Beyond the Emergency Fund)

Once your emergency fund is established and high-interest debts are under control, it's time to focus on other savings goals. This might include saving for a down payment on a house, planning for future travel, or investing in further education. Setting clear, specific goals can help direct your saving efforts more effectively.

Manage/Pay Off Student Loans

For many graduates, student loans are a significant part of their financial picture. Understand your loan terms, including interest rates and repayment options. Federal loans offer various repayment plans based on your income, which can facilitate manageability. Consider refinancing if you have high-interest private loans, but be cautious as this can affect eligibility for certain federal loan benefits.

Choose an Advisor and Begin Investing

Most importantly, consider seeking the advice of a financial advisor such as IntentGen to guide your investment choices. Investing early in stocks, bonds, or mutual funds can significantly enhance your financial portfolio. An advisor can help tailor your investment strategy to your risk tolerance and long-term objectives, ensuring that your hard-earned money is working effectively toward your future.

Graduation marks the beginning of a new chapter filled with opportunities and challenges. By adopting these financial tips, you can establish a solid economic foundation, ensuring a future bright with potential and stability.

 About IntentGen

Our entire process has been designed around one simple goal: We empower clients to live with greater purpose by making the right financial decisions at the right time. Our vision is to become the financial partner for thousands of people, helping them savespendprotectgrow, and give their resources—all with an eye toward the people, places, and things that matter most.

When you work with our advisors to shape your future, you'll receive personalized service and planning, customized strategies, and real support from real people. Your decision to forge a committed partnership with our team is the foundation of our ability to provide world-class solutions. Contact us at (630) 821-6990 or visit us at intentgen.com.