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On Your Own: A Recent Grad’s Guide to Financial Planning



Financial Planning Tips

Are you on the verge of graduating, or have you recently graduated? Well, congratulations! One of the best and most significant decisions you can make just after graduating is to create a financial plan right away. Even if you are not a personal finance pro, just by creating a simple financial plan, you’ll be giving yourself a huge head start in life. If you’re worried about the looming economic uncertainties, worry not, because there will always be economic uncertainties. It is just the way the world works.

With that being said, to help you get started on the right foot, we’re publishing this collection of simple financial planning strategies that you should adopt now that you’ve graduated and are on your own. So, if you’re ready to get your financial house in order, let’s dive into these financial planning tips.

Financial Planning Tips for New College Grads

Best Financial Planning Tips

1.   Live on a Budget

Creating a financial budget is the first strategy and the foundation for everything else that you choose for your financial management. If you want to avoid accruing massive sums of consume debt, begin growing your personal wealth fast, you must always be willing to be different from the average person. With that being said, the budgeting concept is straightforward but very difficult to execute.

To create a good budget, you should at least know how much you earn every month versus what you’re spending. In this case, if your expenses are higher than your earnings, figure out what things you can cut out a little or entirely. You can also consider getting yourself a part-time job to boost your income.

The key thing to remember, is to know how much you have coming in every month, what your spending that money on, and how much is left over. Do this for yourself, and you’ll be able to implement our other recommended financial strategies.

2.   Have a Savings Plan

After you evaluate your spending pattern, you should prioritize having a savings plan. Unfortunately, most graduates often place savings at the bottom of their priority list. However, making savings a top priority and having a disciplined savings pattern early, can help you better manage any doomsday scenarios that your career or the economy will throw at you in the future. In addition to this, having a savings plan will put your years ahead of your peers in terms of net worth if your start early.

It doesn’t matter how small your paycheck is, start saving as much as you can right away. Financial experts recommend an initial savings goal of 3-6 months of living on just basic expenses. This may be unachievable for a new graduate who is just starting their careers, but it sets an ideal long-term goal on which to work.

Related: 15 Tips For Retiring Early

3.   Learn Some Investment Basics

You should understand that saving and investing money are not the same thing. After you’re done setting up your saving account to a comfortable level, the next step is to think about other ways of investing your excess money. There are great investment options like stocks, bonds, real estate, or other financial instruments.

Of course with investing it is always a good idea to be cautious. Be ready to lose some money or all of it if you need higher returns. The golden rule here is the riskier the investment, the higher the potential return rate. If you’re making long-term financial goals like retirement, it would be wise to take more enormous investment risks early on, but the reduce your risk as your retirement date draws closer.

Of course, before you dive in to the investing world, it may be wise to read an investment book or two first.

4.   Have a Retirement Plan

Yeah, we know you just graduated, and retirement seems so far away! However, the earlier you have a retirement savings plan, the better off you’ll be in the future. Likewise, it will be easier to maintain a steady lifetime savings plan. Also, the sooner you start saving for retirement, the better the return package in terms of compounding and tax benefits. Some of the best retirement plans include:

a.    IRAs

This is the most common retirement plan as they have a wide range of investment plans. One can easily set up a financial institution to hold a certain amount of your total income for investments in stocks, cash, and bonds for retirement.

b.    401Ks

These are also commonly known as employer-sponsored retirement plans. The 401K plans include:

  • Defined Benefit Plans: These are commonly known as pension plans, where the company guarantees its employees a good retirement package. It is a rare type of plan these days in which the company puts money into one investment pool, and the pension plan invests in it.
  • Defined Contribution Plans: These are currently the most common types of workplace retirement plans set up the employers. In this setup, an automatic payroll deduction is enforced to enable employees to contribute to the company plan. The company contributes to your account based on your contribution level, for example, dollar for dollar. Withdrawal of this money is tax-free after retirement.

Speaking with a financial planner, accountant, or even a bankruptcy lawyer will help you figure out the best option when you get confused about retirement savings versus paying off debts.

Related: 7 Smart Financial Moves

5. Pay Off Your Debts

Paying off your debts after college should be a top priority after graduating. Debts can be the leading financial hindrance to your long-term financial plans. Prioritize with the debts that have a higher interest rate and set a time in which you shall have cleared these debts.  Also, pay off your credit card debt as quickly as you can.

If you have several debts spread out amongst different lenders, you may consider consolidating your loans. This may not be a great idea if you can afford to pay off these loans quickly. The end goal is to pay off your debts with the least expensive option.

Consolidation requirements may be strict, but they certainly help you to pay off your debts at a lower interest rate with only one lender and one payment to make. Whichever choice you make, put up a quick plan to clear your debt right away!

6. Setup a Healthcare Coverage Fund

Your parents may have covered your health care insurance plan while in college. Now that you are a graduate, you will have to secure your health coverage. If you’re lucky enough to work in a corporation, you may benefit from the health and medical coverage that they offer.

Not having a medical cover may cause a massive dent in your finances in case of a severe illness or accident. Secure your health care coverage for yourself soonest possible to be on the safe side.

7. Follow Your Passion

How can this be considered as a financial tip? Unfortunately, most people pursue career opportunities solely for financial gain, only to realize later that they can’t stand their jobs and then start over from the ground again. If you pursue a career purely for financial gains only, it may cost you more financially and personally than pursuing your passion.

Regardless of the financial concerns that you may have, save yourself from this misery early on by pursuing your passion. The truth is that money has a way of working itself out when you find a way to do what you love.

Related: How to Live With Passion

8. Be a Giver

Out of all of the recommended financial planning tips, this one is the most difficult for people. And while it may not sound like sound financial advice on the surface, giving is important. So, use the same approach in savings by committing a certain giveaway percentage of your income. The money can go into a charitable cause or your place of worship. If you maintain the discipline of giving money early in your life, you won’t feel a pinch when contributing to other areas of your life.

In some instances, you’ll even be able to write-off some of your contributions, saving you money come tax time. Of course, the returns you get from being a giver may not show up in your bank account right away, but you’ll certainly benefit from doing so psychologically, because it feels good to do good.

Wrapping Up Our Financial Planning Tips

The most exciting times of your life are the years after your graduation. The real key to achieving financial security is to start early by setting up a solid financial foundation. Unfortunately, many schools do not give these financial lessons, so the best way is to learn independently. Sure, you may face some setbacks, but don’t be afraid to make mistakes.

The great news is, if you follow these handful of financial planning tips, you’ll be way ahead financially than most. So, keep your focus on your financial goals, and it will only be a matter of time before you become a financial success.

Till next time,


Veronica Baxter is a writer, blogger, and legal assistant operating out of the greater Philadelphia area. She writes for the Law Offices of David Offen, who is a successful Bankruptcy Lawyer in Philadelphia.