Summer has officially commenced with the Memorial holiday, and that also means schools are about to come to a conclusion.  Many college seniors across the country will be entering the “real world,” seeking full time employment.  The years in college and all the part-time jobs have, hopefully, inserted fundamental personal finance principles that will help you flourish in the future.   If you need a refresher, chill out, you have come to the right place!

Budgeting, budgeting, budgeting!

What was it like when you received your first paycheck?  What did you do with the money?  Did you spend it all?  “A good start is half the battle.”  Having a budget, in our opinion, reduces stress.  (The real world can be stressful!)  In essence, a budget is your personal cash flow statement, understanding where your money is “flowing,” particularly in the “outflow” column.   Successful businesses and organizations pay very close attention to their budgets, so why wouldn’t you do the same?

Student loans – know your options

Why do we emphasize budgeting?  Because that is the foundation on which financial security is built, and really the first step toward financial independence.  If you are graduating with a student loan, repayments begin soon (usually six months after graduation), and there are several options from which to choose.  Keeping your student loan intact (i.e. making on-time payments) can help build up your credit profile, which can lead to better deals and arrangements from lenders and service providers.  For instance, the best financing deals on cars are only available to top-tier borrowers, and car insurance in most states incorporate an insurer’s credit score in calculating their premiums.

Click here to understand how credit scores work

Employment – examine the whole package

Part-time jobs or transient work you did in college days helped build up your resume, to which neither employers nor you often paid much attention.  Now you are in pursuit of a career, what should you be thinking about when entertaining job offers?

Chances are, under the current labor market conditions, you will receive multiple job offers.  Salary no doubt is the biggest factor, but the total employment package should be carefully examined to reach a decision.  Here is a list of common items to think about:

• Retirement plan such as a 401(k) – Is it available? If so, what are the details? Who is the plan’s investment adviser?  Are they reputable?
• Insurance – what types of insurance coverage are offered? If it’s health, what types of plan available?  Does it include dental and/or vision?  What about life and disability insurance plans?
• Location – where you work has a significant impact on your take-home pay. Will relocation cost be reimbursed?  Will you be working in a state where income and local taxes matter?  What about other costs such as housing, transportation, and leisure?  Other non-monetary factors include crime rates, quality of life, demographics should also be considered.
• Culture – do these companies have a reputable corporate culture? Recent events have shed light on a number of issues such as harassment, (in)equality, and consumer privacy.  Are the company’s core values aligned with your personal ones?

Taxes – get to know them  

Only two things are certain in life—death and taxes.  With better income comes with more citizen responsibilities, and paying taxes is one.  A good starting point is your paystubs.  Study them carefully and learn what the tiny numbers inside the boxes mean.  Various tax withholdings take away between 15% and 25% of your gross pay.  While you have some say on how much federal and state get, payroll tax—Social Security and Medicare—is mandatory and fixed.

Of course there are ways to reduce your tax obligation.  Salary deferrals to a retirement plan, health insurance premiums and HSA/FSA contributions directly offset your taxable income, dollar for dollar.

For a visual illustration of the share of your wallet, click here.

Estate planning – do the fundamentals

The other “certain” thing about life should not be neglected.  We understand this topic is probably dead last on a 20-something’s mind who just got out of college.  We are not suggesting that you need a full-blown estate planning review, either.  But do you know what to do when the HR paperwork asks you to name “beneficiaries”?  If you are not married, do you know who you would want to put on your retirement plan and life insurance?

If you will also be tying the knot, estate planning becomes much more important.  At the very least, create a will and name guardian(s) for your future children in case something happens to (both of) you.  Consider buying term life insurance (yes, only term life) to help payoff mortgage and debts and provide immediate liquidity relief.

Also, digital assets (social media profiles, email accounts, online photo albums) are part of your estate.  Some basic planning will go a long way should the need arise.

If you have any questions about these tips, or would like more information, please don’t hesitate to let us know.  We wish all the grads great success!