There's no reason the end of college life has to mean the beginning of money stress. Here are six fundamental tips you can apply now to set yourself up for a lifetime of financial success.
5. Avoid dangerous debts.
Once you have credit, it can be tempting to use too much of it.
Every new graduate needs to respect debt. It’s a powerful financial tool that can help you build wealth when used the right way. For instance, you can use low-interest debt to get an education so you earn more over your lifetime, or to buy a home that appreciates in value over time. But if you use high-interest consumer debt—such as credit cards and payday loans—to finance a lifestyle that you can’t afford, it can be devastating to your financial life.
To learn more about eliminating all types of debt and creating the financial future you deserve, check out the audiobook version of Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love.
6. Start investing sooner rather than later.
The last tip that many new graduates don’t appreciate is to start investing for retirement sooner rather than later. You might be thinking, I haven’t even found a job yet; why should I be worried about retirement?
The answer boils down to the power of compounding interest. The earlier you start saving, the less you’ll need to save over time. That’s because the magic of compounding allows you to earn interest on your interest, and that gives you a lot more bang for your buck.
The earlier you start saving, the less you’ll need to save over time. That’s because the magic of compounding allows you to earn interest on your interest, and that gives you a lot more bang for your buck.
Let’s say you’re a smart new graduate who works in human resources for a Fortune 500 company. You sign up for the 401(k) retirement plan and contribute $50 a week. If you never increase your contribution and earn an average 7% return, after 40 years you’d have a nest egg worth over half a million dollars. That’s impressive, considering you only contributed $104,000 ($50 a week x 52 weeks in a year x 40 years) of your own money.
Choose to invest through tax-advantaged retirement accounts whenever possible, because they reduce your tax liability. If you’re lucky enough to have a workplace retirement plan (such as a 401(k), 403(b), or 457) never, ever pass it up! Participation is especially important if the employer offers matching, which is free money.
And just about anyone who has taxable income can open up an Individual Retirement Account or IRA. To learn more about the different types of retirement accounts and the best places to open them, download the free Retirement Account Comparison Chart.
Being young doesn’t mean you have to be foolish. It’s easy to start off on the right financial foot by building an emergency fund, getting a handle on student loans, avoiding debt, and investing for your future as early as possible.
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If you’re graduating, or you know someone who is, there is a great graduation present that you can enter to win right now. Quick and Dirty Tips is running an exclusive sweepstakes to win an amazing book bundle. It includes books like Jamie Oliver’s cookbook 5 Ingredients, and 50 Rules Kids Won’t Learn in School by Charles J. Sykes. Just think of it as a starter pack for life after college. Enter for your chance to win here. Good luck!
Teacher With Graduate Students image courtesy of Shutterstock