Finance Tips for Grads as They Enter the Workforce
By Steven DeMatteo, Financial Advisor and Certified Exit Planning Advisor at UBS Wealth Management USA
Now that graduation season is over and students have turned the tassel to the other side, it's on to the next stage. Graduating from high school and college are not only exciting milestones, they also mark important transitions from student to adulthood, with increased independence for the next chapter in life. As college graduates enter the working world, it is a good time to set personal finance strategies and goals they can leverage for the long term.
Getting a job may be a first step, but it is only the beginning. As students join the workforce, they’ll need financial, in addition to career, intelligence to establish a successful personal finance strategy. What are some words of wisdom local grads can benefit from?
Following are four financial tips that we suggest at UBS’s Torrey Pines Wealth Management, which new grads might want to consider as they move into the next phase of their lives.
1. Start building up savings for a rainy day: The first step for a newly independent adult once he or she has a job is to build an emergency fund. Urgent situations can happen that could cost thousands of dollars. Many have learned the hard way that failing to plan for the unexpected—such as car repairs or unforeseen medical expenses—can have lasting financial consequences. But how much should you set aside?
Look at your expenses. How much would you need to live each month? Your "rainy day fund" should reflect your employment risk, first and foremost. Unless you have a virtually guaranteed job, it's good policy to have at least six months' worth of rent, utility bills, groceries, and other basics set aside. If you've started your own business, or work at a start-up, you may want to set aside up to a year of expenses to tide you over in the event of a cash flow crunch.
2. Put money away for retirement: Once you have your safety net, you should be covered for most typical emergencies, and you can begin investing in higher return assets to grow capital for long-term needs.
At the very least, contribute enough to your company’s retirement plan to get the match from your employer. That's free money, and it's part of your compensation. In many cases, you should probably do this even before paying down debt, but do the math first. And if your employer doesn't offer such a plan? Start saving as early as possible in an Individual Retirement Account (IRA). Many financial experts suggest saving at least 10% to 15% of your total income to ensure the same lifestyle in retirement. Getting started with the savings habit right out of school can help make it much easier to meet your longer-term lifestyle and retirement goals. Talk with a financial advisor to determine what type of IRA makes the most sense for you.
3. Make it automatic to pay down debt: You'll want to get rid of the burden as soon as possible, so have student loan payments automatically deducted from your bank account. That way, you'll never forget to pay on time. If you can, do the same for credit cards and any other debts, because the faster you get out of the red, the easier it can be to save for big milestones, and you’ll improve your credit rating for other needs, too.
4. Build a strong foundation for financial success: Starting your first job is a big deal but avoid the temptation to spend that new paycheck as fast as you earn it. With the right focus on savings, investments, and debt freedom, you can put yourself on track towards a fun and stable financial future.
Steven DeMatteo is a Financial Advisor with Torrey Pines Wealth Management at UBS Wealth Management USA. Together with his team, Steven draws on broad experience in the wealth management industry to help clients exit their companies, develop retirement plans, and preserve wealth for future generations. He has earned the Wealth Advisor and Certified Exit Planning Advisor (CEPA) designations; was recently recognized by Forbes Magazine as a Best-In-State Wealth Advisor; is a member of the UBS President's Council, recognizing the firm's top advisors, and is a recipient of the UBS Aspire Award for leadership, collaboration and service. He is also a retired Marine Corps helicopter pilot where he was decorated for performance in peacetime, humanitarian and combat operations. He can be reached at firstname.lastname@example.org
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Approval date: 7/19/2022
Review Code: IS2204047