College Grads, You Can Start Out on the Right Financial Foot in These 9 Ways

Some 1.8 million students will graduate with a bachelor’s level degree in the U.S. in 2017. 

And most, if not all, will have to start – as Millennials are fond of saying – adulting. They will have to earn money, and pay back student loans, and pay bills, and save for a rainy day, a car, a home and retirement. Here’s how graduates should go about creating a sound financial plan, according to experts.

1. Create a budget. Keep track of your expected and actual income and expenses using software programs such as Mint or You Need a Budget. Of note, making a making a budget is not a once-and-done task. Instead, you adjust as needed. “This is ongoing, and is not a test you study for to pass and then forget,” says Autumn Campbell, a financial planning resident at Upperline Financial Planning.  “Budgets are malleable and change as your life circumstances change. Having a budget keeps you honest with yourself and in-tune with your expenses.”

A budget can also help you live within your means, says Jason McGarraugh, a certified financial planner with Neal Financial Group. “You need to know what you make and track what you spend,” he says.

2. Have an emergency fund. Save some of your income for an emergency fund (three to six months of living expenses is a good target). “This will help you weather a car breakdown, an impromptu spring break trip, or needing to fly home to see a loved one,” says Campbell. “This way you will be expecting the unexpected, financially, at least, and will be far less likely to pay interest on unplanned expenses.”

Of note, Ally Bank pays 1% on balances in savings accounts, which, Campbell says, “is as good as it gets for completely liquid assets these days.”

Campbell also says opening a Roth IRA is a “great choice for most earners at 25 years old.”  She recommends investing in low-cost index funds such as the Vanguard Total Stock Market index fund (VTSMX) and the Vanguard Total Bond Market index fund (VBMFX). “Those two funds will expose you to the whole U.S. market and allow you to take part in the benefits of investing,” says Campbell. Other options: target-date or target-risk funds.

Also, take advantage of your employee benefits if you have them, says McGarraugh. “If you do not want to read the employee handbook, hire someone, such as a certified financial planner to do it for you.”

4. Repay your student loans. Graduates who borrowed money to pay for college will have to evaluate how best to pay back their federal and/or private loans. If you haven’t done so already, visit the Education Department’s website,, to determine the right repayment plan, how to make payments, and what you can do if you can’t afford your payments.

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Source: USA Today | Robert Powell