Pinnacle Wealth Managers help clients with their finances at every stage of life—from youth to retirement. With the members of the Class of 2016 taking their first steps into the adult world, we asked our Wealth Managers what financial advice they would offer a recent graduate.
These are their responses.
You are never too young to be thinking about your financial future and plotting a course. This means thinking about what your lifetime financial goals might be, plotting a career path to achieve those goals, and constructing a rudimentary plan to achieve your goals.
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Make a list of your goals, and then prioritize your goals and monetize your goals. Know what you are saving for and when you get a raise or a promotion, sock away the new dollars. If you want to buy a home, start saving now and before you know it, you’ll have a down payment.
Handling Credit Cards
Credit cards are a necessary evil. Get one (two at the most) and make small purchases, and pay the full balance off every month to build your credit rating. Do not buy things that you don’t have the cash to pay off immediately.
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The biggest piece of financial advice I would give a young man or woman is to avoid credit card debt. It is extremely easy to get into trouble with them, then hard to dig yourself out once you are in a hole. Any mistakes can stay on your credit report for seven years. A low credit score will not only impact your ability to obtain new debt, but will also make items like car insurance much more expensive.
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Watch what you put on your credit cards and be sure that you can pay the balance off every month. Once you have a balance on your card that you can’t pay off monthly, it’s very hard to get it paid off because of the high interest rates.
Company Retirement Plans
Invest in your company’s 401k or 403b, especially if they have a match program. Don’t leave free money on the table. A 3% match from your employer is like a 3% raise. Start with as much as you can spare every month and slowing increase it over time.
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If you are fortunate enough to enter the workforce with a company that participates in a retirement plan, take full advantage of it. Assuming there is an employer match, you should try your best to sock-away at least as much as it would take to get the full match from the employer. Young professionals have many years to witness what the power of compounding has on their investment. Adding an immediate return on top of their investment will increase that power exponentially.
Being Frugal Pays Off
When I went to college, one of my goals was to be financially independent as soon as possible, and not be dependent on my parents. I learned to shop frugally for everything—every penny was important.
Learning to be frugal when you have low debt will build good habits for the future. If you maintain these habits over time, you will have ‘surplus’ money to save and pay down any debt that you create later.
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Do not live beyond your means. In other words, don’t spend your paycheck before it’s deposited. Always ask yourself if the item is something you need, or something you merely want.
Save Save Save
Beginning to save at a young age is very important. The earlier you start, the more money you will accumulate over time. If your firm offers a matching contribution, do your best to take advantage of it. One of our best pieces of advice is to start saving something from each paycheck; as you get raises, increase your retirement contribution by 1/2 the raise amount in each paycheck. Keep the rest to improve your lifestyle.
A Little Knowledge Goes A Long Way
Educate yourself early on finances. Become knowledgeable about your financial future. If you need help, start reading and seek others who can help you. You’re never too young to start some kind of plan to achieve what you want, whether buying a house or paying off college debt.
Money Isn’t Everything
Be true to yourself. Don’t try to do a job if it does not correspond to your beliefs and values.
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