My financial tips for new graduates

By Michael Haubrich, CFP®

As a financial planner for more than 40 years, I’ve seen the critical role that early financial habits play in shaping a person’s long-term financial well-being. As a new graduate, you’ve reached a significant milestone, and now you will fully explore, discover, and shape your future. You have my heartfelt congratulations on this milestone and accomplishment. The transition from student life to the working world offers a unique opportunity to lay a strong financial foundation. Here are a few bits of wisdom to help you kick-start your financial well-being.

Determine a budget and live below your means

Creating a budget that outlines your income and expenses helps you establish money-wise habits and allows you to see exactly where your money goes each month. Categorize your spending into essential needs (eg: rent, utilities, transportation, student loans, groceries) and wants (eg: dining out, entertainment, non-essential clothing/accessories).

While the prospect of a substantial paycheck may feel like long sought after financial freedom, resist the urge to overspend. Living below your means allows you to save more and avoid debt. Focus on building a solid financial foundation first, and gradually increase your spending as your financial situation continues to improve. Prioritize saving and investing over immediate gratification.  You can use online tools to help you keep track of your spending. At the end of each month, review how you’ve done against your budget. If you’re over budget, be conscious of your spending and adjust. If you’re under budget, good for you. Consider contributing to your emergency fund. Early habits will help set you on a lifelong path of financial well-being.

Start saving early for your retirement

Take advantage of compound interest by starting to save toward your retirement as soon as you enter the workforce. If your employer offers a 401(k) or similar retirement plan, contribute at least enough to get the full company match—it’s essentially free money. If a workplace plan isn’t available, consider opening an IRA. Even small contributions will grow significantly over time, thanks to the power of compounding.

Manage your debts

Many graduates leave college with student loans and perhaps other forms of debt. It’s crucial to manage this debt effectively. Use credit cards only when necessary—only charge what you can afford to pay off each month. If you’ve got other debts, devise a plan to pay off highest-interest debts first, while maintaining regular payments on student loans. Consider consolidating or refinancing loans to get a lower interest rate.

Ensure your credit standing

Your credit score affects many aspects of your financial life, from getting a loan to renting an apartment. Establishing good credit early on is essential. Pay your bills on time, pay-off or keep your credit card balances low, and avoid opening too many new accounts at once. Regularly check your credit report for errors and take steps to correct any discrepancies.

Be prepared for the unexpected

Life is unpredictable, and an emergency fund is your financial safety net. The goal should be to have three to six months’ worth of living expenses in a separate, easily accessible account. This fund will help cover unexpected expenses like medical bills, car repairs, or sustaining you through a job loss. Start small if needed but make regular contributions to this fund a priority so your financial well-being doesn’t suffer when the unexpected occurs.

Set some financial goals

Having goals provides direction and keeps you motivated toward achieving them. Financial goals are no different than other goals you may have set as a student. Whether it’s saving for a down payment on a house, paying off student loans, or building an investment portfolio, set specific, measurable, achievable, relevant, and time-bound (SMART) goals. Break these goals into smaller, manageable steps, and track your progress regularly. Achieving these milestones will build your confidence and encourage you to stay on track.

While this is not an exhaustive list, this does provide a place to start ensuring your financial well-being. By following these steps, you’ll build a solid financial foundation that will serve you well throughout your life. Remember, the habits you establish now will shape your financial future, so take control of your finances today and set yourself up for long-term success.

Congratulations on your graduating to your next life phase. We wish you all the best as you create your great life!