You’ve just graduated college and scored your first job — congrats, #girlboss, you’re on your way to big things. Starting your career — and finally bringing in that steady paycheck — is such a major milestone and comes with its own set of freedoms and responsibilities. While you’re able to finally take a post-grad vacation and splurge on some new shoes, you’re also faced with profit sharing options, planning for your financial future and paying back student loans. To help navigate the tricky financial terrain as a workforce newbie, we’ve enlisted the help of Lule Demmissie, managing director of investment products and retirement at TD Ameritrade. She has the 411 on 401(k)s, and shares her top five financial tips for new grads.
1. Start saving automatically (even if it’s just a tiny bit). “Have money automatically transferred into a savings account each month,” Lule says. Even if the amount is minimal, the savings will add up as they’re compounded over time. Your top priority is to build an emergency fund of three-months worth of living expenses, just in case you lose your job for whatever reason. Don’t stop saving once you have your emergency fund. “It’ll also come in handy later for major purchases, such as a new car, a down payment on a home or a deposit on a first apartment,” Lule says.
2. Give yourself a monthly budget to stay debt-free. Okay, having an overall money-in, money-out budget is a good first step, but the key to budgeting success is tracking your spending on the regular. Keep a monthly spending spreadsheet so you can see where your money goes each month, and then plan accordingly. Be realistic about the type of lifestyle you can afford (do you really NEED it, or just want it?) in order to avoid racking up credit card debt. We’ll be honest, sometimes you’ll eat more ramen and pre-game more often than you did in college (when your parents may have been supporting you) to save money. Making sacrifices now to avoid all new debt (remember, you’ve already got those college loans) will abso-freakin’-lutely be worth it in a few years.
3. Opt-in to your employer-sponsored plans. Young professionals, you aren’t too young to start saving for retirement. Lule explains that “many employers offer retirement-savings programs that match some of your contributions and deduct money from your paycheck, before taxes.” Which means saving for your future is a no-brainer for you. If your employer doesn’t offer a 401(k), open an Individual Retirement Account (IRA) to start saving.
4. Create a financial plan. Lule says the first step to a solid financial plan is to establish what your short-term and long-term goals are. Do you want to buy a house in the next 10 years? Travel extensively? Retire early? Whatever your personal goals, you’ll need a financial plan to reach them. Lule suggests using a free online calculator if you’re planning solo or contacting an investment consultant if you need a little help. Finally, “Remember to continually check your plan and rebalance investments annually,” Lule says.
5. Start an optimal portfolio. “When investing your hard-earned money, it’s important to consider your financial goal, risk tolerance, asset allocation and time horizon,” Lule explains. “Since your portfolio (the different funds your money is invested in) seeks to maximize potential returns while minimizing risk, it’s important that your investments are allocated over a variety of asset classes such as equities, fixed income and cash.” Meaning, you should make sure to spread that moolah around.
Do you have any foolproof financial planning tips that keep you flush? Tweet us @BritandCo to share your smarts. For more info and adorable advice about money, check out TD Ameritrade’s Age of Wisdom Videos!
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