Save Smart: 7 Financial “Musts” for College Grads
As a tax professional, it is important to not only provide tax services to clients but also provide guidance on key financial topics that can help set them up for long-term success. One area where we can provide valuable advice is to recent college graduates who are just entering the workforce and starting to navigate the world of personal finance. Graduating with your college degree can be exciting and just as nerve-wrecking. The idea of being on your own in the “real” world is now a reality. And, if the press is to be believed, you’ll have to be smart with the money you have!
Here are some key areas recent grads can think of as they begin the first step in their post-academic career:
Taxes for college grads
This is one of the most important areas for recent college graduates to understand. It’s important to educate them on how their employment status (employee vs. contractor) can impact their taxes. If a recent grad accepts a position as an employee, they will be tasked with filling out a W-4 form from their new employer. It is important to know how taxes work, and the importance of tracking and saving receipts for potential tax deductions.
Budgeting for college grads
Budgeting is an important skill for anyone, but it’s especially important for recent college graduates who may be dealing with student loan debt and other financial obligations. Sitting down and determining an appropriate budget is a crucial first step for recent grads. Tracking expenses, living within your means, and setting financial goals are all key aspects of budgeting. Go out and enjoy your avocado toast, and enjoy the bottomless mimosas at brunch! Just make sure you budget accordingly.
Setting up a savings account for college grads
Setting up a savings account and understanding the benefits of compounding interest can help set recent grads up for long-term financial success. Additionally, understanding the differences between traditional savings accounts, high-yield savings accounts, and money market accounts can help recent graduates make informed decisions about where to store their savings. It might be a good idea to look up the meaning of an FDIC-backed bank.
Retirement planning for college grads
Saving for retirement doesn’t happen overnight. By beginning to save for your future, it actually makes the process much easier, and a lot less scary later on. It’s never too early to start planning for the future. Recent graduates who grasp the concept of starting to save for retirement early, the different types of retirement accounts (such as a 401k or Roth IRA), and how to maximize their retirement contributions will set themselves up for greater success later on.
How to invest for college grads
While retirement accounts are an important part of investing, there are other types of investments to consider. Some of those options include stocks, bonds, and mutual funds. Tax professionals can provide guidance on the basics of investing, including the importance of diversification, the risks and rewards of different types of investments, and how to evaluate investment opportunities.
Credit score management for college grads
Maintaining a good credit score is important for obtaining loans for big purchases like homes or cars. Building and maintaining good credit is crucial to obtaining the lowest rates when the time does come to borrow money. A few ways you can build and maintain a good credit score is by paying bills on time, keeping credit card balances low, and monitoring credit reports regularly.
Insurance for college grads
Understand the different types of insurance available to you. Life is full of accidents, and insurance is intended to financially protect you from them. Health, auto, and renter’s insurance will all become important factors to consider after coming out of school. Learning the different types of insurance, coverages available, and premiums will give you the opportunity to shop for the plan that best fits your needs.
By learning how to navigate the complexities of personal finance, you can set yourself up for long-term success. Ready to learn more? We’re happy to talk!