Adulting 101: Four financial tips new grads need to start doing now!Mel Barnes, SVP – Chief Operations Officer
Congrats to the class of 2019! We know this is a huge time in your life and, honestly, it’s a little nerve-wracking as well (we were 22 once, too). As a recent grad entering the workforce, your financial concerns are now different. Make that a lot different. But some decisions you make now can have a huge difference on your quality of life and financial health down the road. So let’s get you started on the right foot.
Here are four financial tips that recent graduates need to start doing now. Unlike your commencement speaker, we’ll keep this brief. Promise.
Saving For Retirement
“Save for retirement? But I just graduated!” was the refrain from about 10-15 years ago. Nowadays new grads are more forward-thinking when it comes to saving for retirement. The simple fact is, you can’t rely on Social Security to cover your retirement and have to save some on your own. Fortunately, there are many ways to do so. First and foremost, if your employer offers a 401k plan, take advantage of it, especially if they match a portion of your contributions (even if it’s just 1%). An employer-match is free money, so there’s no reason not to. If your employer doesn’t offer a 401k, or you want to save even more, we also recommend opening a Roth IRA. Your max contributions for 2019 are $6,000. You pay taxes on your money now, so you can get tax-free deductions when you’re ready to retire. There’s way more to it, so we recommend going to Google (or better yet, one of our financial advisors) first.
Setting A Budget (and Sticking To It)
Did you have a budget in college? Awesome. Did you stick to it? Even better! Budgeting for life after college isn’t much different than in college. Really, if you have a job, budgeting as an adult isn’t much different. You’re just making more, but also spending more, so act accordingly. You hopefully already knew this, but your paycheck isn’t just what your employer is paying you, divided by 24 pay cycles. Payroll taxes, certain benefit plans, and retirement are all taken out first. What you have left is what you have to live on. So take your paycheck, deduct your non-negotiables (i.e., rent, food, college loans, etc.) then your savings (such as money towards your IRA or just a general savings fund for a new car, vacation, whatever). What’s left is what you can spend on streaming services, happy hours and $5.50 caramel macchiatos. But the most important part isn’t setting a budget; it’s sticking to it. You’ll thank yourself later.
Managing Your Different Accounts
So as you can probably tell, you’re liable to have a lot of accounts. Checking. Short-term savings. Long-term savings. 401k retirement. Roth IRA retirement. And on and on. Managing these accounts is a job in itself. You could go old school with a file cabinet with different manila files for each of your accounts. You could also Google “managing accounts app” and find plenty of digital solutions. The most important thing is to find what works for you.
Setting Financial Goals
You’re earning money, saving money and managing money. What are you doing all of this for? Here’s the fun part: Whatever. You. Want! Seriously. Saving for a new car? A vacation in Maui, or Mt. Rainier? Your own home? Your savings goals are as unique as you are. Contrary to popular opinion, you don’t get to do whatever you want to as an adult (though if you want to have cookie dough ice cream for dinner, you do you...but only every once in a while). However, you do get more freedom and final say over how you spend your money than ever before. So set your short- and long-term goals, stick to them, and experience the feeling of knowing that your sound savings habits made your goals happen!
Sure, you may be out of college, but that doesn’t mean you’re on your own. Your buddies at OSB are here to help you. Need to open an account, or simply want some financial advice? Stop by a branch or contact us at 405-260-2265!