Financial Advice for Graduates (and Parents)

Graduates please pay attention to your finances. And parents heed this financial advice too if you haven’t been as vigilant as you could have been. Don’t avoid dealing with your finances because you don’t want to or don’t like math. If you avoid dealing with your finances now you will pay more in the long run and have fewer choices to live the life you want.

Time and again folks tell me they wish they had understood the consequences of an aspect of their finances earlier. Their inattention has put them in less than ideal spot and they now feel compromised.

To pay attention or being mindful means forming good habits now. You form good habits by doing today, not thinking about doing tomorrow. If you don’t understand an issue or its importance, research it on the Internet or find someone who can help like a trusted friend, parent, or coworker. The sooner you do it the better.

Here are three ways to be mindful of your finances to set you on a path to prosperity and not regret.

Reckon with Your Past Debt

Do you know how much debt you have? Not just the monthly payment, but the actual outstanding balance.

Do you know the interest rate? Do you know how long it will take to pay off the balance?

These are tough questions to get a hold off, especially the last one. It can be discouraging.

But some general principles can get you on track. Pay off the loan with the highest interest rate first while making minimum payments on your other loans. This way you can attack the most expensive loan first to lower your borrowing costs.

The financial system is stacked against you if you miss payments or are not on a plan to pay the loans off in full. Your credit score can suffer from not paying attention to your debt. And bad credit not only hurts your prospects for ever qualifying for a low-cost mortgage, but it can increase your auto insurance premiums and adversely affect your job prospects.

Finally, don’t avoid understanding your student loan debt. Get into a repayment plan that works for you. Here are tips for repaying your student loans.

Be Present with Today’s Spending

Do you know how much you spend each month for housing and general living expenses like food, transportation, and clothes?

Track your expenses for one month to get an idea of how much you spend and how you spend it if you don’t have a number off the top of your head. You can use paper and pencil to track it or you can use an app like Either way, get a number and make sure it is not more than you bring in each month.

If you are working on paying off your debt, you shouldn’t be incurring new debt. Please distinguish between “wants” and “needs.” Wants can be very expensive over the long-run especially if you don’t pay off your credit cards each month and place additional charges on the card. Every new purchase will have interest applied to it. Its like paying a surcharge for every new purchase. Crazy!

If you can’t pay off your credit card balance each month, then don’t put any more on it. It is as simple as that.

Prepare for the Future

Make sure to contribute to savings. A good rule of thumb is to start by saving 10-15% of your gross salary. If you have big student loan obligations, a lower number is okay.

Please make sure to contribute to your retirement plan at work, if you have one, especially to get any matching funds from your employer. If you don’t contribute to get their match, it’s like you are taking a salary cut!

Remember math is your friend here through the power of compounding. Even if you put just a small amount away consistently, then you will have more in the long-run.

Saving $100/month every month for 10 years will yield $3,528 in earnings, $8,729 in 15 years, and $17,103 in 20 years assuming a reasonable 6% return. The numbers just get bigger and bigger the further you are out in time.

So in sum my financial advice is to be mindful of your past debt, your present spending, and your future savings in order to develop good financial habits that last a lifetime.


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