Courtesy of Lilly Faust
When Lilly Faust graduated from college in December, she was lucky enough to land a job right away.
She also managed to move on her own, with a roommate, to an apartment in Montclair, New Jersey.
“I’m very proud of myself,” said Faust, 22, who is now a first-grade teacher in New Jersey.
“I was this broke student just trying to make ends meet,” she added. “It’s really nice to have my own money coming in and being able to support myself.”
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She did it with careful planning.
Faust worked part-time while attending Stockton College in New Jersey and started his own business, selling clothes online. This allowed him to save for a down payment on an apartment. She is now saving $1,000 per paycheck for student loans and an additional $1,000 per pay period to live off this summer when she is not receiving a salary.
Going from school to the adult world of work and money is not necessarily easy. However, starting on a good financial footing can allow you to succeed later.
Many young adults think about getting rich quick when investing, said certified financial planner Cathy Curtis, founder and CEO of Curtis Financial Planning in Oakland, Calif.
“A lot of young people have a distorted view of how to invest in the markets,” she said. “They invest in IPOs, companies they think are cool.”
In reality, you should invest in index funds and watch your money grow slowly, she said.
Therefore, you should open a 401(k) if your employer offers one and contribute at least until the company matches, she said. If this is not available, you must open a Roth Individual Retirement Account.
If you wait too long to get started, you’ll miss out on the compound interest that can really make your money grow, said CFP Tom Henske, managing partner of New York-based The Affluent Insurance Advisor.
According to an analysis by asset manager Vanguard, someone who starts saving $10,000 a year at age 25 in a 401(k) with a matching contribution and stops at age 40 will have over $1 million to spare. retirement.
Someone who starts at age 35 and saves $10,000 a year for the next 30 years will have $838,019 in retirement, according to Avant-gardewhich used an assumed annual return of 6% and did not take inflation into account.
It’s also important to set aside money for emergencies, separate from your retirement savings.
make a budget
A budget essentially keeps track of what money comes in, like your paycheck, and what goes out to pay bills.
When setting your budget, treat your savings like a bill, Henske advised.
“If you start with things like nights out, dining out and socializing, you’ll just save what’s left over,” he said. “Do not do that.
“Start with what you save and put everything else around.”
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If you don’t have a checking account, open one, Curtis said. The same goes for a credit card, as long as you use it responsibly and don’t accumulate debt.
“Building credit is the foundation of your financial life as an adult,” she said. “The sooner you start, the better.”
Your credit impacts everything from your ability to get a loan or rent an apartment to the amount of interest you’ll pay on any loan.
If a credit card isn’t a good option right now, consider establishing credit with a secured card, which is guaranteed by the money you deposit in an account.
Find a job
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Although inflation is high and there are concerns about a looming recession, college graduates are generally finding a positive job market right now, according to reports.
The number of entry-level job postings on LinkedIn increased nearly 17% in the first three months of 2022 compared to the same period last year, according to the social media giant. According to National Association of Colleges and Employers.
All of this, coupled with the tight job market and the so-called Great Resignation, gives graduates confidence. According to the job site, four out of five college students think they’ll get a job offer that matches their career goals Freak.
“Job seekers are in the driver’s seat,” said Vicki Salemi, career coach at Monster. “They have the greatest advantage [over employers] in the entry-level job market.”
His advice: Look for the right person, which means considering benefits in addition to salary, asking questions during the interview process, networking with family, friends and teachers, and negotiating any offers you receive. .
Understand your benefits
Once you’ve landed a job, make sure you understand your workplace benefits, especially financial benefits such as pensions, insurance, and health savings.
Be sure to purchase long-term disability insurance, which will cover you if you need to miss work due to illness, Henske said.
When it comes to health insurance, he thinks young adults should opt for a high-deductible plan because they don’t use insurance as much in their twenties as they do later in life.
This way you can open a health savings account, which allows you to contribute money tax-free. This money also grows tax-free for your lifetime and withdrawals are not taxed, as long as they are used for eligible health expenses.
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Disclosure: NBCUniversal and Comcast Ventures are investors in Tassels.