Education isn’t over once the diploma is in hand, warns Cathy Weatherford, president and CEO of the Insured Retirement Institute (IRI).
Learning the best ways to handle money is an ongoing process, and, said Weatherford, in the current challenging times, “College graduates … will need to be smart and savvy … to maximize their paychecks and their savings.”
Pointing out that research has shown a link between financial knowledge and both financial planning and savings levels, she said that the best thing parents and financial professionals alike can do for graduates as they head out into a tough job market and tougher economic climate is to provide them with the resources and information they need to make decisions that will carry them through—not just now, but “throughout their lives.”
To that end, IRI has offered Weatherford’s top 10 suggestions on how to be smart with money at home and on the job—now and in the future. (Also, check out what the 15 Best Paying College Degrees are at AdvisorOne.)
Here are Weatherford’s tips for graduates:
1. Making a budget, making savings a part of that budget and then sticking to it is the single most important piece of advice. Said Weatherford in an e-mail, “Above and beyond anything else, it’s imperative … No matter what age, regardless of profession or salary, no one can afford to live beyond their means. And their budget has to include savings. Many people will try to do this backward and save whatever is ‘left over’ after paying for everything else. All too often the result is having nothing saved for the future. Making savings a budget priority is the only way to make sure that there is something socked away.”
2. Pay off debt; don’t increase it. Tackle those obligations with the highest interest rates first, and get rid of them as quickly as you can. Be savvy on the terms of student loans, and have a plan to pay them down.
3. Don’t carry a credit card balance. Pay it off every month so that its high interest rates can’t extend debt and scuttle other plans.
4. When considering job offers, look at the whole picture—not just salary, but benefits packages. Retirement plan contributions can add up, particularly early in a career; health benefits and other perks can make a big difference in your overall financial picture.
5. Speaking of retirement plans, make sure you contribute to yours, and make sure it’s enough to take full advantage of any employer match. Said Weatherford, “This is money you have earned as part of your compensation package; do not leave it on the table.”
6. Tax breaks granted for retirement savings, such as for 401(k) contributions, can boost the amount you can sock away for the future. Using pretax money to fund retirement allows that money to grow tax deferred and allows you to put away more early in your career. 7. Think long term and investigate Roth IRAs. Although the contributions are taxed, when you take the money out in retirement distributions, those will not be taxed.
8. Don’t toss those receipts, especially for little things like lunches and coffee. Save them, add them up, and see if you might want to re-evaluate what you spend your money on. You might decide to make some money-saving changes, such as bringing food from home and using that coffeepot you got as an apartment-warming gift.
9. Don’t look for a bank based strictly on convenience. Find one that won’t deplete your funds with minimum balance and ATM fees. Check interest rates, too, and try to find the highest you can.
10. Keep learning about how to handle money. Check out employers’ resources, if you need help, or look for a financial advisor who can help you reach your financial goals.