When the month of May rolls around I generally think about Mother's Day, Derby Day, Memorial Day ...you get the picture.
This year, I thought more about graduation day.
After the last cap is tossed in the air and the celebrations are over, it's time for graduates to focus on the future. Futures that will include their diligent and disciplined use of money. So it makes it critical that I share some personal finance tips with graduates and their families.
Here are a few of my best personal finance tips for graduates:
Debt is misery. Debt is much like that extra weight on your gut. Easy to get started, harder to get rid of. If you incur debt as a graduate, that burden may follow you a good portion of your life. I'm talking about credit cards. Try to resist the offers that will come fast and furious. If you are very disciplined, have one card that you use for everyday expenses and pay it off at the end of the month.
Start an emergency fund now. This is probably the best piece of advice that I can give. An emergency fund that covers three to six months of your current expenses. Use it for real emergencies. If you are hurt or sick and cannot work, get laid off, or have a large car repair. Having this fund will keep you from making mistakes with credit cards and going into deeper debt.
Don't buy a new car. Why? It's much more expensive in terms of insurance, maintenance and property taxes. Plus who wants a car payment for five years? I know there will be a temptation to get something new rather than continue to drive that old crap heap you've had for years. Think of it this way. Buying a new car is a commitment and an assumption. It's an assumption that you will be able to pay for it based on your current situation. What if you don't keep that job? Enough said.
Save aggressively NOW. When you get a job, try to put aside some for emergencies, but also for retirement. At this point, your expenses are lower than they will ever be. Why not save like Scrooge for your retirement in your early life? You can afford it and it will never be easier. Commit to 10 percent and never save less.
Frugality is cool. Yep, I did say it was cool to be cheap. Try to make things last. Don't go out and buy a new thingamabob every time something breaks. Repair stuff, do it yourself, and stretch those greenbacks. I'd rather have the money than the stuff. Money gives you options.
It may be smoke and mirrors. Ever look around at your friends and notice they are always getting new stuff? They may not be as rich as you think. Most of them are buying this junk on credit. They are going into debt for the next pair of shoes, jewelry or new car. Not you. You've been reading my articles. You know what you can afford. Remember frugality is cool!
It never gets easier. Life and money will not get easier as you get older. Start these habits right after graduation. Stick with them for the next few years when you're tempted to spend like you'll live forever. If you keep debt at a minimum, save for emergencies and retirement, you'll never have major money problems.
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You know you can't afford it. You might as well be burning your money.
A good credit history is essential to a successful financial future. Landlords, lenders, insurers and even employers use it as a way to judge you.
Yes, you want to make sure that you establish a credit history, but that does not mean taking out every credit card imaginable. Taking our high-interest cards with large balances can lower your credit score and lead to overspending.
If you want to increase your credibility in the eyes of lenders, paying bills on time is essential. Also, it is a good way to avoid unnecessary late fees!
A graduate degree is not only a financial investment, but a time investment. Before embarking on a post-graduate degree, it is important to do a cost-benefit analysis to ensure the diploma you are seeking is right for you.
Going after a degree at a time when you have to take out enormous student loans just to graduate puts you at a significant financial disadvantage once you finish school.
It is called your emergency stash for a reason! And no, a flash sale at Nordstrom Rack is not an emergency.
Be honest, when was the last time you actually had a full fridge? Despite what you keep telling yourself about how expensive groceries are getting, the bottom line is that eating at home saves money, especially if you are single.
We understand that retirement could not feel further way when you are in your 20s. But it is never too early to start saving. Need an incentive? When you are young, you have the advantage of giving your investments much more time to accrue interest and grow.
As much fun as it is to get a tax return at the end of the year from the IRS, you only get a big refund when your employer is withholding too much money from your paycheck during the year. If that's the case for you, adjusting your withholdings may be a good idea.
Most budget gurus suggest that your rent should be no more than 30 percent of your monthly income. If you are anything like us, you are paying much more than that.
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