Money Moves After Graduating - by Peter Geckeler
I graduated from college two years ago, and if you’ve ever graduated from high school or college, you remember the constant stream of advice that comes your way. Everyone has some little piece of advice to share, and when I graduated I felt like a sponge trying to soak up a fire hydrant of advice and information.
The topic that you’re likely to receive the most input on is your personal finances. Uncle Joe from Minnesota will tell you to save all your money in your 401k and only eat ramen noodles for the first three years. Your mom’s friend, Nancy, will likely tell you to enjoy the extra income and spend as much as possible until you get married and have to start budgeting responsibly. Your best friend’s third cousin twice removed will implore you to invest in his up and coming technology start-up so that you can be a millionaire by age 30.
Now that I’ve been out of school and away from the “noise” for a few years, I have developed a short, sweet list of my own financial advice that I hope will be helpful as you plan for the next step:
1) Before doing anything, Set 3-5 financial goals AND right them down. Make these goals your roadmap as you start out this new stage of life. Filter spending decisions through these goals. And remember, writing the goals down makes you more likely to achieve them.
2) Start an emergency fund. This should be priority number one, because it establishes a foundation to begin saving for long-term goals. An emergency fund also becomes your safety net when things “pop-up” (which they will – thanks car tires).
3) Establish a budget. This can be the most daunting and difficult item on this list, but just remember that the overall goal is to spend less than you earn. Utilize technology (phone apps, websites, etc.) that track your expenses to give you a good head start. Compare those expenses to your income and begin refining how much you should be spending each month.
4) Contribute to your retirement and/or other long-term goals. We can easily fall into the trap of thinking that retirement is light years away and we have plenty of time to save for it in the future. The reality is – the longer you wait to save, the less time your money has to work for you in the form of accumulating interest and time in the market.
5) Don’t finance a lifestyle on debt. One of the biggest mistakes I’ve seen people my age fall into is attempting to keep up with the Jones, also known as their friends or parents. Recognize that we are not all in the same place and some individuals are making double what others are making.
Thanks for reading and feel free to comment if you have other pieces of advice that would fall into your top five money tips.