7 Financial Planning Tips for New College Grads

As a fresh batch of college graduates heads into the real world, we want to share some timely advice.

First and foremost, new grads (congratulations!), we think it is important that you always keep the big picture in mind as you strive for financial and career success. New York Times columnist David Brooks wrote in his 2015 book “The Road to Character” that there are two sets of virtues. Resume virtues are the skills you bring to the marketplace. Eulogy virtues are the ones that will be talked about at your funeral – whether you were kind, brave, honest or faithful.

Talk of eulogies will no doubt strike you, as early 20-somethings, as premature in the extreme, and the advice imprecise. So with that as a backdrop and our role as families’ independent Chief Financial Officer in mind, here are some quick tips relating to money management that we think can help:

1. Stay on top of your finances.

Whether you are from a wealthy family or have no outside support to fall back on, know how much you are spending and saving. A laissez-faire approach will cost you and can lead to life-long bad financial habits. Track your money by using Mint, an Excel spreadsheet or whatever method you will stick with.

2. Avoid unnecessary debt and pay your bills on time.

Resist those ubiquitous credit offers and be wary of using your credit card. Carrying substantial card balances, even if you have the best intentions of paying them off soon, costs you needless interest and can wreck your credit standing. Prospective employers routinely check credit scores.

3. Start investing.

Set aside money regularly in stocks or mutual funds. Be a long-term investor, not a trader seeking to profit from a hot stock or popular fund. For more on this topic, read our blog post on the best ways for young adults to begin investing.

4. Take advantage of your employer’s 401(k) or similar retirement plan.

Put 10 to 15 percent of every paycheck into a 401(k) if your employer offers one. If you can’t manage that much, at least contribute enough to get the company’s full match (usually 4 to 6 percent) – it’s free money.

5. Open a Roth IRA.

A Roth IRA is a wonderful gift to your future self. Contributions are made with after-tax money, unlike a traditional IRA, and then your money grows tax-free and benefits from decades of compound interest.

6. Get insured.

You can be covered on your parents’ health insurance policy (if they agree) until your 26th birthday. Auto insurance also is mandatory, and make sure you have life insurance if you are married or someone else is reliant on your income. Those from wealthy families should also consider umbrella liability insurance.

7. Give something back.

Find a way to give money, or time, to a cause you are passionate about. If you aspire to be on a nonprofit organization’s board of directors someday, see if it has a junior board you can join.

The material shown is for informational purposes only and should not be construed as accounting, legal, or tax advice.  Altair Advisers LLC is a registered investment adviser with the Securities and Exchange Commission; registration does not imply a certain level of skill or training.  While efforts are made to ensure information contained herein is accurate, Altair Advisers cannot guarantee the accuracy of all such information presented.