The New College Graduate’s Guide to Investing
The New College Graduate’s Guide to Investing
By Jonathan W. Szostek, Vice President of Investments, CERTIFIED FINANCIAL PLANNER®, RICP®, AIF®, CRPC®, Scarborough Capital Management
Congratulations, graduate! You’ve made it through all the tough years of school, and now it’s time to set out on the rest of your life. And while your immediate concerns may be focused on finding that first post-college job, or setting out on some grand adventure, you’re also in a unique position to make the financial decisions that will set you up for success from here on out.
Unless you were a finance major, you probably didn’t learn a whole lot about investing money during your college career. And what you already know is probably a little confusing—maybe even downright scary.
After all, investing can be a complicated process. But we’re here to tell you that it doesn’t have to be—and that you’re in a prime position in life to maximize the benefits of a sound investment strategy.
Starting From Scratch
You have a college degree (again, congratulations). You may already have a new job (if so, congratulations again). Maybe you just moved into a hip downtown apartment with some friends. You’re establishing yourself as a genuine, bona fide adult.
And as you get acquainted with your new adult responsibilities, you may find that your money is flying out to cover things like rent, utilities, and food (not to mention those delightful student loan payments) faster than it’s coming in. The whole thing may be a bit overwhelming… but don’t panic!
Getting financially organized is no different than getting organized in any other aspects of your life. How did you move all your things into that new apartment? How did you manage all that classwork in college? You had a plan, and you stuck to it.
Since you’re already balancing so many things as you start your life after college, you can consider your investments just another piece of the puzzle. It’s the perfect time to get used to budgeting for your future—after all, what’s one more thing at this point? Start planning for it now, and it can become second nature.
Save into a 401k
One of the easiest ways for a new college grad to get started making investments is with a 401k. If offered by your employer, these specially designed accounts may help you maximize your retirement savings, and the sooner you start contributing to one, the better off you could be.
Your employer may even offer to match your 401k contributions up to a certain point, which is something you should definitely take advantage of—after all, it’s free money! This is usually done as a percentage of your salary, and it’s a good indication of what your minimum contributions should be.
For example, if an employer offers to match the first 3% of your salary contributed to your 401k, you should contribute at least 3%; otherwise, you’re losing the matching money. You should always look to save as much of your income as you can, even though it may be tempting not to. But think of it this way: if you’re not taking advantage of an employer’s 401k matching, you’re effectively reducing your savings rate.
Get Help from Technology
One of the biggest advantages today’s graduates have when it comes to investing (and to a lot of things, really) is technology. There are apps out there that make investing and budgeting easier than they’ve ever been before. Some of these apps even go so far as to make personal finance management into fun, using colorful graphics and game-like elements to keep users engaged.
It’s a far cry from the ledgers and spreadsheets of yesterday. And it’s generally every bit as effective, as long as you’re aware of a few key things.
The first thing you should look into is a good budgeting app. Many budgeting apps make it easy to see all of your accounts, keep tabs on your debt, and set up monthly budgets with automatic alarms for overspending. What more could you want?
But the key to getting the most out of any budget is to actually pay attention to it. While an app can tell you when you’ve hit your monthly limit on takeout food, it can’t stop you from ordering more the next time you’re hungry!
Get Started Now
No matter how you plan to save for retirement, the key is to start doing it as soon as possible. Investments tend to grow over time so the sooner you start, the better off you can be.
If you’re ready to start saving, your best bet is to talk with a professional and come up with a strategy that fits your exact needs. Having a qualified financial advisor on your side will give you a huge advantage not just in tackling your everyday expenses, but in putting away the money you need for a long and comfortable retirement.
And yes, you may have just graduated college, but that doesn’t mean it’s too early to start thinking about retiring—it makes it the perfect time to start planning.