by Center for Personal Finance editors
McLEAN, Va. (5/19/15)—This spring will bring a lot of "firsts" for many college grads including first jobs and first paychecks (
USA Today May 4).
In the months after graduation, financial experts agree on five things every new grad should be doing with his or her money:
- Create a spending plan. Understanding how much money you have coming in as well as going out is the first step you must take in keeping a successful budget. Become familiar with the difference between your gross pay and net pay so you know what you'll actually have left to live off of after monthly financial commitments.
- Pay yourself first. Start saving in an emergency fund—even if you only can stick a minimal amount aside each paycheck, that amount will add up quickly.
- Develop a student loan repayment plan. Understand financial obligations and how long it will take you to pay off debt. Get up to speed on details about your loan and pay attention to interest rates. Visit your credit union for information about refinancing or other student loan repayment options.
- Understand company benefits. Once you get a job, make note of important dates such as deadlines for signing up for health insurance and when you'll be eligible to participate in your company's retirement plan. Also become familiar with your company's vacation policy, corporate discounts, public transportation benefits and the like.
- Start investing in a retirement plan. Whether you open an individual retirement account (IRA) at your credit union, or a 401(k) through the company you work for, start saving for retirement now. It probably seems like retirement is so far away that you don't need to worry about it yet, but now is when time is on your side and the benefits of compounding interest are highest. If your company offers to match your contributions to your 401(k), contribute at least the amount you need to in order to get the match. If you don't, it's like leaving free money on the table.
Working hard, paying bills, and putting money aside for your needs and
wants in the “now” are so often automatic in our day-to-day lives – so why
aren’t we thinking about or planning for the future? According to the 2015
Retirement Confidence Survey from the Employee Benefit Research Institute,
nearly one-third of workers have almost no retirement savings or investments
(< $1,000), and a staggering 57% are underprepared with less than $25,000
for retirement.
