Recent college graduates struggling with student loans, consumer and credit card debt, financial planning, if thought about at all, ranks as a distant priority. Securing your first job, hopefully in your field, is a tremendous accomplishment and the first step towards financial independence! The twenties are an especially pivotal stage, particularly as it pertains to creating a secure, lifelong financial foundation. Here are a few tips to get started.

1. Appraise your debt situation. List all your debt. Make note of the lender, the amount owed, the interest rate, the type of interest rate (e.g., fixed or variable) and the minimum monthly payments. Prioritize your debt payments with an emphasis on paying off high-interest debt first. Pay all bills on time. Review your student loan debt with your lender and/or knowledgeable financial counselors.

2. Get spending under control. Avoid increasing credit card and consumer debt. Limit yourself to only one or two major credit cards. Pay in cash whenever possible. Establish a monetary target for all discretionary spending (e.g., $100 a month). Before making any significant purchase, observe the 2 week rule. Mull over the prospective purchase for 2 weeks. If you discover that you really do not need it, do not buy it. Avoid shopping online. Do not take out loans to finance vacations or luxury items such as a boat. Avoid splurging on an expensive car. Discern the difference between appreciating and depreciating financial assets. Draw up a monthly budget. Make note of your fixed and variable expenses. Track your spending. How often do you exceed your budget? Establish a monthly savings goal. Are you able to save at least a minimum of 5% to 12% of your monthly after-tax income? Find ways to curb spending and increase personal savings.

3. Know your credit score. Everyone should review their credit report at least annually. Obtain a copy of your credit report from any of the three credit reporting agencies (Equifax, Experian and TransUnion). One website that may be of interest is annualcreditreport.com.

4. Your job is more than just the salary. Learn about the various “perks” that come with your employment. The major areas of concern are disability benefits, education assistance (e.g., tuition reimbursement), health insurance, life insurance and retirement benefits. Does your employer offer a retirement plan such as a 401(k) or 403(b)? Does the company match contributions? If so, what is the percentage? What types of investing options are available? Can you only purchase company stock? Or, can you invest your 401(k), for example, through a mutual fund company? If so, what are the options in terms of asset allocation? Evaluate the track record of the funds in terms of performance and risk. Review the specifics of your health plan. It is helpful to know the toll-free number of the health carrier in case you have questions or concerns. Some companies offer a flexible spending account or (FSA). It is a tax-advantaged plan which enables employees to set money aside for eligible health care and/or dependent care expenses. Additional employer benefits to consider include direct deposit, discount programs, free parking and opportunity to join a credit union.

5. Analyze your insurance needs. Even recent college grads may need to purchase insurance (e.g., auto, disability or health) depending on their personal situation.

6. Start an emergency fund. The fund should be in safe, liquid funds. Calculate your living expenses and add another 15% to 20% for unexpected financial emergencies. The emergency fund should weather you through at least 3 to 6 months of living expenses.

7. Become a savvy consumer. Strive to become well-informed in matters of identity theft, credit and consumer laws. Exercise safety precautions when engaging in online transactions such as electronic banking. Safeguard your social security number and other confidential financial information.

8. Time is your best friend when it comes to financial planning. Individuals in their twenties are at the most wonderful stage when it comes to wealth-building. The miracle of compounding interest seems to work effortless in their favor. Even “small savings” can add up significantly over the course of several decades. Consider the hypothetical scenario of a 25-year old who deposits $100 in an account that delivers a 3% rate of return (assuming the rate of interest is constant) compounded annually and who diligently deposits an additional $100 every month in the same account for the next 40 years. By age 65, that “small savings” would have grown to over $90,000! Pay yourself first. Start an automatic investment plan (e.g., a tax-deferred plan such as a Roth IRA or IRA) with a mutual fund company. There are funds that allow one to make minimum monthly contributions of $25. Choose the mutual fund company and the fund carefully. Consult with knowledgeable and experienced financial planners, if necessary. Approach your financial future in stages. Create a 5 year plan! Write down your financial goals for the next 5 years. Review each goal and then map out a “workable” strategy.

For informational purposes and not intended as advice.