Tips to New Graduates

Graduation season is upon us and many of you will be taking your first job. While your financial matters might not be foremost in your mind, it is important for you to begin your financial life as strong as possible. Doing so will set you on the path to Financial Success. Consider the following:

1. Get on a budget - To begin, keep an itemized list of all your expenses – from your monthly rent to that round of drinks you bought last night to celebrate your graduation. While keeping these records, make some choices along the way but, at the end of the month, see how much you spent on each category of expenditure. Then, make some changes. Remember one rule: Pay Yourself First and always put money away to establish your emergency fund, begin your retirement savings, and begin to save for your goals.

2. Payback your loans – If you’re average you’ve borrowed over $15,000 for your education. Know when your grace period for interest charges ends and make sure you make payments when they are due. Create an automatic withdrawal from your cash account to ensure you make your payments. Perhaps make additional payments, to reduce the principal. (See: http://mufinancialtip.blogspot.com/2008/05/student-loan-repayment-strategies.html )

3. Update your student checking account – Know how your student checking account changes upon graduation. Oftentimes, banks make checking accounts “free” for students but begin to charge the “ex-student”, following graduation. While some do remain free, some begin monthly charges as high as $10.00 per month. Understand how yours works and make a change if it is to your advantage.

4. Establish your credit rating – If you haven’t checked your credit report, do so. Annualcreditreport.com has links to the major credit reporting agencies. You are allowed one free report per year. If you want to see your credit score, there is typically a charge. Do not borrow, thinking that it will help your credit score. Your capacity to repay debt is greater the less debt you have.

5. Resist temptation – I know you want a new car. Try to resist. Save money to purchase a car, as opposed to borrowing the money, and remember the cost of operating the car. Do the same with current fashions. Purchase classic clothing that supports your professional appearance at work. Whether you like it or not, the old adage of “Dressing for the job you want” remains true in many settings.

6. Understand your benefits at work – Understand what your benefits are and use the ones that you need and know the others so, when you do need them, you can sign up for them. Start your retirement savings TODAY. Make sure you have medical insurance and disability income insurance, if available. Understand the advantages of a Health Savings Account and use it to your benefit. In the event of your untimely death, understand that your need for life insurance increases, as those that depend on your income increases. With your insurance portfolio, the goal is to have sufficient insurance to protect your financial goals – no more or no less. If you can self-insure, through greater deductibles, your insurance premiums will decrease and you’ll discover money you can save for your retirement, for your MBA, or for your BMW…whatever it is that defines Financial Success to you!

- Robert O. Weagley, Ph.D., CFP(r)

Chair, Personal Financial Planning

University of Missouri

Columbia, MO 65211