Personal finance tips and advice for recent college graduates
What’s the best part about graduating from college?
Morningstar columnists and professionals are here to tell you what they’d like to know when they graduate. Here are their wise words, personal financial advice, and more for college graduates.
Money-saving tip: Save when you can, where you can
“When you are just starting out, saving for retirement seems hopelessly abstract. It is very difficult to prioritize it over other financial goals like buying a first home or taking a big trip. So here are some tips: “As soon as possible, set and achieve some short-term financial goals. Scoring small financial wins will help you buy the value of saving in a way that saving for retirement—a distant, abstract goal—might not.”
–Christine BenzDirector of Personal Finance and Retirement Planning
Whether your company offers a 401(k) or 403(b) plan, invest in it as soon as you can. By doing so, you’re setting yourself up for investment success. How much you save and how much time you save is a two-punch win-win approach to building wealth for retirement. And if your company matches some or all of your contributions, all the better!
“Invest your retirement plan contributions appropriately. Don’t let your contributions sit in a low-interest cash account because you don’t know where to invest them. If your company doesn’t drop you in means the plan’s target date closest to your retirement date (which can be hard to think of, given Considering you entered the job market), put the money out there yourself. As time goes on and your retirement fund builds up, you may decide to diversify beyond the target date option. But it’s the best place to start.”
–Susan DziubinskiContent manager
“Contribute to your 401(k) as quickly as you can. Even if you think you can’t afford it. It wouldn’t hurt so much if it ran out of your check before you saw it!”
—Sylvia Hauser, senior copy editor
“I keep my retirement portfolio very simple. It’s a widely diversified group of passively managed funds across major asset classes. The consistency and uncomplicatedness of things has given me the peace of mind of knowing I should be in a decent financial position if I decide to retire.”
–Amy ArnottCFA, Portfolio Strategist
Money Spending Advice: Find balance and spend carefully
“Listen to the quiet voice within. Easier said than done, but one thing I wish I knew when I was younger is that the obvious manifestations of success — making more money, managing a group of people in the business — wouldn’t necessarily give me more happiness. Don’t assume that every rung on the career ladder is worth climbing.Ask yourself, “Am I dreading this job Sunday night, or looking forward to next week?”Sometimes there will be congruence—the reward will be a fun and worthwhile job.But sometimes there won’t be err on the side of fun and worthwhile.
Your “time on earth” is more important than your financial allotment. There’s no shortage of information on how to manage financial assets—how to set asset allocation and choose investments, for example—including on Morningstar.com. But there are fewer guidelines for managing what is by far the most valuable resource – our time on Earth. Life goes by very quickly, so it pays to ruthlessly adjust it when considering how you spend your hours and days. “
—Christine Benz, director of personal finance and retirement planning
“Things are just things. Focus on the experiences. When we first start earning, we all have the urge to buy everything we can afford, and I certainly went on spending as much (and sometimes more than) as I could afford.” Many others on the subject said it should You have to start saving early, and you should. But when it comes to spending, my advice is to spend on purpose. I’ve learned that I don’t necessarily remember the necessary phone or car, or the right outfit I splurged on after I started earning, but I do remember every A concert, every backpacking adventure, every economy road trip, even the flea-infested ones. Focus on the experiences, the memories will last much longer than with the latest AirPods.”
–Ruth Saldanhasenior editor at Morningstar.ca
Personal Finance Advice: Stand up for yourself
“Negotiate for the best starting salary you can (within reason). Don’t worry about hoping to impress them and get a promotion later. All subsequent raises and bonuses will be based on your starting amount. Find out what your skills are worth, and don’t be short on changing yourself.”
–Sarah NewcombBehavioral economist
“Network — I don’t mean in any artificial way. I mean, get out there, chat with people outside your department, and learn as much as you can about what other people in the company are doing. Get to know both their jobs and the personalities of those departments.
“Of course, keep your boss happy. Your boss is the single most important person to launch your career. But don’t put all your eggs in one basket. Through your actions, make yourself as visible as possible to multiple decision-makers. You want to have many important people around They stand up for you, not just one person.”
–John RekenthalerVice President for Research
Financial Planning Tip: Create Good Habits – Money and Other
“Don’t let your credit card balance exceed one month’s net wages. Credit card debt will silently choke your money.”
–Sylvester FloodChief Content Strategist
Remember, federally funded student loans are considered “good debt,” and paying it off early isn’t necessarily your best financial move. If you can consolidate your loans at a low interest rate, and your payments are manageable, you can carry that debt for a long time without hurting your credit or your lifestyle. The general rule here is that if your student loan interest rate is around 6% or lower, you’re better off investing your extra money than paying that debt down faster.”
Sarah Newcombe, behavioral economist
“Live within your means. That doesn’t sound like much fun. But since many young graduates already carry student loan debt, don’t take on more debt by spending more than you spend. Make sure you have the income you need. Cover your bills, and build a fund.” for emergencies, and start building a retirement fund. Then reward yourself with those Lollapalooza tickets.”
—Susan Dzyubinski, content manager
“Get used to voting. Less than half of Americans ages 18-29 voted in the 2016 presidential election, a much smaller percentage of the total electorate. Still, the system seems ineffective for you. Vote until you can make a difference.” Change. Vote in local elections as well as national, and during midterm elections as well. Let elected officials know about priorities like climate action or health care.”
–Leslie NortonManaging Editor, Sustainability
Professional tip: be flexible
“Don’t bother trying to choose a career for life when you’re in your 20s. My original plan when I started as a Finance Analyst at Morningstar at 22 was to try things out for a few years and then decide to see what to do next. I was lucky to finish From working for a great company I’ve stayed with for almost my entire career but also have tried out many different roles over the past 30 years I even left Morningstar briefly to work as a financial advisor for another company Experiencing different roles allowed me to find strengths I didn’t know That I’ve had it before, fine-tune what’s important to me, and discover the sweet spot between what I’m good at and how I can contribute to empowering investors.”
—Amy Arnott, CFA, Portfolio Strategist
“Find the widest margin between opportunity and cost of living when you’re starting out. Feel free to go abroad for this. I entered the post-financial recession with the intention of getting a job in journalism, and there were very few opportunities in North America. I ended up in Hong Kong with a two-hour commute, including a boat ride, each way. What I did during that trip (meals, work, podcasts) was within my control, my rent was manageable, and the opportunities were world-class. A few years later, I was able to shake off that commute, go back home, and start building the daily routine I wanted.If you’re interested in traveling abroad, consider undergraduate/postgraduate programs, especially if they come with a scholarship.Sometimes you can live on campus, “Schools often help with the financial side and may get you started with an entry-level job. Employers also value international experience, which is a form of human capital and education that will benefit you for the rest of your life and career.”
–Andrew WillisMorningstar.ca Content Editor