With a presumably large portion of this class expecting to graduate college in the near future, one common worry is our financial success after we walk down the isle and pick up our diplomas. Graduating for many marks the first time they will be out on their own, either entering the workforce or moving on with their schooling taking out substantial loans to pay for the continuance of their studies. Just like all other new beginnings, this one will be scary at first.
On top of being financially independent for the first time, there are many other complicating factors. Our economy is finally recovering from a recession and the job market looks optimistic for many. However we are all at an age where we understand what just happened. Seeing the market dive in 2009 has left many of us skeptical of investing money in stocks. A study found that most millennials are investing like their grandparents losing significant gains. Buying into an exchange-traded funded following the S&P 500 would have realized a 30% return, while many millennials money sat on money in savings accounts realizing very limited returns. After a shaky January the account would be down 4%, still having a sizable advantage over the out dated savings fund.
Aside from the market being a big scare, we also face the new age of electronic money. Something not many our age are afraid of and most of us embrace, however when not used properly it is easy to find ourselves in a financial disaster. If the class is anything like me, cash is becoming a scarcity in my wallet with most purchases being funded through debit or credit cards. As college graduates, its not likely were going to make a big ticket purchase right off the bat and bankrupt us for the future, however it is easy to lose sight of the every day purchases. The purchases add up over the month and it don’t have to be faced until it is summed at the end of the month in our bills. It’s likely that electronic currencies such as bitcoin will only further complicate this making it even more difficult to track our spending.
As scary as the first portion of this may seem, all hope isn’t lost for us. By acting responsible with our finances we can set ourselves up for long term success. The first recommendation for college grads is to get educated on personal finances and the stock market. I’d say our class has a solid leg up on our piers, however it is important that we remain informed about the status of the economy post graduation. The second piece of advice is to to work with a financial advisor and set goals for yourself, both long term and short term. Weather its paying off grad school loans, owning your first home, paying for a big wedding, or retiring to a home on the beach in Florida, you just need something to work towards. Working towards your goals will not only help you eliminate impulse spending but also be rewarding when you finally reach them.
Although we will be up on the stock market, saving for things like retirement can be tricky. When we graduate it may seem to early to start saving, but if you have the extra money the investment could pay dividends in the long wrong. The problem is we most likely be as informed on the retirement type funds as some seasoned financial advisors. They will be able to explain the differences between 401(k)s, IRAs, Roth IRAs, and emergency savings funds. There is no perfect combination to use, each individual can use a unique combination to maximize their investment. Financial advisors can also help decide the benefits between things like professionally managed mutual and funds following a set index.
My last piece of advice is to have faith in the stock market. We’ve seen the troubles its caused in the recent years which scares us, but remember there were booming times too that we are too young to remember, and these times will return.