posted on July 30th 2018 in Market Commentary with 0 Comments /

Congratulations! We know you’ve already heard that from family and friends, but after four years of college — or more if you have obtained an advanced degree — you deserve it. And the well-wishing cheers go beyond Johnny or Jane; well done, mom and dad!

A couple of weeks ago, one of our advisors was invited to an afternoon BBQ celebrating a client’s son’s conquest: a four-year degree.

When the advisor saw his parents, he wasn’t going to miss the opportunity to praise them. They had done a fantastic job raising their son, now a young adult filled with optimism and ready to take on the world. Mom and dad had also earned a place in the spotlight.

This seems like a great time to give a few tips to recent graduates.

You’ve just graduated from college; what are you gonna do now?

You’re leaving your dorm and entering the best job market in years. Be thankful for that.

Now, let’s look at some steps that can bridge the divide between cramming for exams and the new challenges that lie ahead.

1. Social and business networking

Or as we call it, making new friends. Many of you have jobs lined up, others may not be so fortunate. You may be moving across town. Or you may be headed to new city. It’s an exciting and frightening prospect.

Whether you will remain in close contact with familiar faces or not, it’s time to meet new people. Being in a community and connecting with new folks will go a long way in helping to ease the pressure and loneliness of your new environment. New friends not only allow for a robust social life, but these contacts may lead to new business opportunities.

Don’t go into a new venue thinking, “What can he or she do for me?” People will see through you, and it’s hard to make a good second impression. Instead, build relationships. That’s “business-speak” for making genuine friends.

2. The dorm is no longer an option

You may move back home, and if you do, it’s only fair that you pay rent.

Another thought — get out on your own and rent an apartment. You’ve lived with roommates in college, so consider getting a roommate or two to share your new place. You’ll save hundreds of dollars each month and you won’t be coming back to an empty place every evening.

One young man we know purchased a condo and rents the second bedroom. Not only does it reduce his monthly outlays, but he has someone helping him pay the mortgage and he’s building equity.

3. Time to budget

You may be earning more money than you’ve ever made. But your expenses will blossom, too. It’s important to balance the inflow and outflow of cash.

Write down your daily purchases. Create categories that match your spending pattern: rent, utilities, entertainment, student loans, and so on. It’s important to know how you spend so you can create a realistic budget.

You want money at the end of the month, not month and the end of the money.

Money problems are sometimes unavoidable. They create unwanted stress. We get that. But needlessly digging a financial hole will create needless stress.

4. Manage your debt

That brings us to the next topic — credit cards. Many of you have them. They are a great convenience, but pay them off at the end of each month, period. The first time you are unable to pay off the card, STOP using it until the balance is zero.

Many cards have extremely high interest rates. Once trapped under the weight of a credit card, the struggle can last a lifetime. We’ve seen it before.

You may have friends who sport flashy new cars. The new car smell will wear off, but the payments won’t. That may not be an issue for you if you live in an urban environment. Fun times are within walking distance or a Lyft ride.

However, your friends may love to post beautiful pictures from exotic vacations on social media.

Be careful not to fall into the same trap — trading memories for debt. Vacations offer new experiences, but you’ll be much happier if they have been paid for upfront.

5. Bad debt and better debt

Debt used to buy an asset like a home is better debt, since the asset is expected to appreciate over time. Debt invested in productive assets is better debt, i.e., a rental property. A reasonable outlay for a car is acceptable. Credit card debt is bad debt.

Many of you have student loan debt. Student loans are an investment in yourself. But they can also feel like a burden when the payments come due.

According to the Department of Education data, the typical student borrower owes $17,000, and the number of those who owe at least $100,000 has risen to around 2.5 million, nearly 6% of the borrowing pool. Let’s get this under control.

Timely student loan and credit card payments will put you on the path to a high credit score. That not only translates into lower interest rates when you need to borrow, but some prospective employers and landlords will check your credit history. Too many bad marks and you’ll find that job or place to live is off limits.

6. One thousand dollars saved is one thousand dollars earned

Short-term savings earmarked for a vacation, an emergency, or a down payment on a home will give you a sense of comfort and satisfaction.

Now, let’s talk longer term — retirement. You’re young and I understand retirement may feel like another universe. But let’s look at it through a shorter-term lens.

You’ve reached the age of 32 and you have nothing set aside in a retirement account. Feeling a little queasy now? Things just got real.

Please, take full advantage of your company’s 401k and any match by your employer. In addition to the tax benefits, you’ll soon create a sizable nest egg.

Saving just $300 a month for 10 years at a modest 7% return would grow to $51,300. Are you more ambitious? Just a couple hundred more a month —$500 — will grow to $85,500 in 10 years; not bad for someone who just turned 32. Any employer match will ease the burden on you.

If the starting points seem too high, start at a lower rung and gradually boost your monthly savings. It’s easier than you think.

If you need assistance on any of the points we’ve shared, our team is happy to assist. Some items may take effort, but they will pay enormous dividends.

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