Personal Finance Tips

Every refined college grad needs to have at least a basic understanding of personal finance. Here are some basics for grads fresh out of college.

1. Have a budget! Many college grads do not track their spending at all. There are a few simple tools all refined college graduates should use. The first is mint.com. This is a great tool that not only lets the refined college graduate to set up a budget but also allows the graduate to track spending. For longer term bigger picture budgets try using a Microsoft office template. These templates are good for setting long term saving and wealth creation goals.

2. Contribute to your employers 401k plan. Many college graduates take months to set up  and enroll in their companies 401k plan. The refined college graduate knows that this is to be done in the first week of work. All refined college graduates know to contribute at least to the employers match. For example if the employer matches up to 6% then the grad should contribute 6% of their gross salary (if the grad gives 6% and the employer matches 6% that is 12% of the grads annual income) . There are very few investments that yield a 100% return immediately this is one of them.

3. Pay off credit and private student loans as quickly as possible. The refined college graduate pays off the entire balance of all their credit cards (at most two) every month. Credit card debt can ruin the financial future of the college graduate. The refined college graduate also pays down private student loans as quickly as possible because they typically hold a higher interest rate than federal loans.

4. Open a roth IRA! The refined college graduate understands the time value of money and knows that a 401k is only the first step in retirement planning. A roth IRA allows the graduate to grow wealth tax free after money is put into the account. The refined graduate understands that taxes and costs can devastate long term wealth creation. That is why the college graduate invests with brokerages that have low management fees and low expense ratios such as Vanguard . A roth IRA can also be set up on an online trading platform such as TD Ameritrade. There are other great brokerages but Vanguard is who we like. A roth IRA can be a key component of wealth creation and unlike an employer 401k plan the refined college graduate has unlimited choice in what they invest in.

5. Have a taxable investment account. 401k plans and roth IRAs are great for retirement planning but the refined college graduate knows that at some point (in the far off future) they will want to buy a house, get married maybe even have a kid. The refined college graduate knows at least the approximate costs of all of these big life expenses.

•   Buying a house. Recommended 20% down is about $45,000 for the median American home and about $55,000 for the average American home, according to U.S. Census data. This is not inclusive of fees and other expanses (man cave decor and toys) associated with buying a home or the house warming party expanses (at least two kegs needed). 
• Weddings cost a ton of money (especially with that open bar). The average American wedding cost is  over $27,000. The refined college graduate knows to not go into large amounts of debt with a wedding. 
• Having a kid is not only a life changing decision but also is expensive. The refined college graduate wants to make sure that their kid has the best life possible. That means providing them with everything they need from birth through college and beyond. The refined college graduate begins planning for a child even before there is an inkling thought of having a child. A 529 plan is started right after college graduation. This allows the power of compound interest to start without the expense of taxes. The refined college graduate knows that once a child is born the cost varies across the U.S. and can be anywhere between $10,000-$17,000 per year. A good starting point is babycenter.com. 

The refined college graduate knows that a taxable investment portfolio is far better than simply dumping money into a savings of checking account for these goals. Most online trading platforms offer commission free trading of Exchange traded Funds (ETFs) that provide great diversification and low expenses. The benefits of investing in a well planned portfolio far outweigh the potential risks. 

All of these topics will be explored further in future posts. This is merely a starting point. For quick tips follow @refinedgrad on twitter. 

Email: therefinedcollegegrad@gmail.com

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