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Recent Graduates

After graduating from high school or college and thinking about the future, grads have the opportunity to start out in the next phase of their lives in a much better financial condition than many Americans who find themselves following the recent “great recession.”

Generally, poor personal financial habits and questionable financial decisions have led many Americans to the undesirable position of digging out from under a load of debt, with questionable retirement savings, and no reliable safety net to catch the fall. The following tips will help the next generation of graduates start out their financial lives on positive financial footing:

Be Financially Proactive

Having just finished coursework in high school or college, it is evident that the standard education system does not adequately prepare its graduates for life in a complex financial world. Even in a state such as West Virginia, which leads the nation in public school financial education programming, many graduates are still unprepared now that personal financial planning is their responsibility.

The key to combating this situation is to become proactive in your financial education as an adult. Read books, study articles, attend seminars and learn the financial language used to control your money, just to name a few. Becoming financially literate and taking complete control of your financial situation is critical to avoiding becoming a victim of the next economic downturn.

Learn Banking

As a new financially independent adult, it is important to establish a financial track record. A strong step in doing so is to establish a banking relationship and learn to manage your cash flow from bank records as it is earned and expended.

Choose an FDIC insured bank and safely store your resources in checking and savings accounts.

Learn to avoid excess banking fees from overdraft charges, ATM fees and low-balance charges. Learn the habit of saving at your bank to pay cash for purchases to avoid paying unnecessary interest on consumable items that lose value over time.

Emergency Fund

Even as young adults just starting out, it is extremely important to save for a rainy day. Emergencies will happen. Saving six to nine months of expenses is the minimum that should be placed in an account that can be easily accessed. This is not a long term investment account, but should only be accessed for “normal” emergencies. Should you find yourself “between jobs,” for example, this fund will allow you to make a more deliberate, educated and satisfying job search to replace missing income.

Student Loans

Student loans can be a powerful tool in achieving your goal of earning a college degree. However, student loans can follow you for a majority of your working life if not managed properly. Develop a plan to pay off these loans as soon as possible. Even a low interest rate carried out over several decades of payments adds up.

Avoid the “American Nightmare”

It seems that the American Dream of the past was to finish school, get a stable job, buy a car(s), buy a home, find a spouse, have children, get a dog, and then spend the next 40 to 50 years working for a wage in order to get out of the load of debt that was accumulated from the American Dream.

Unfortunately, the American Dream has turned into the American Nightmare for many who have now realized that they cannot afford these items.

Now is the time to take a step back and plan for the future. Imagine saving for those initial purchases one makes in life. Imagine controlling your debt load to a manageable level so that you control your future – not the credit card companies and the bank loan officers. Financial expert Dave Ramsey likes to say, “If you live like no one else now, you can then live like no one else later!”

Think About the Future

Albert Einstein once recognized that the greatest invention of mankind was compound interest. That is incredible insight from the inventor of the atomic bomb. Take advantage of the power of money’s ability to work for you!

Start now with regular savings and watch it grow through the power of compound interest. Let the interest you earn grow upon itself. Starting early in life with even a small amount of regular savings (pay yourself first) will result in amazing returns in a few years. No one in America should retire without dignity if one only starts saving early in life.

Welcome to your future! Congratulations for all of your achievements. Now is the time to take control of your financial future. Become educated in the ways of finance. Learn to make smart, educated decisions when it involves your future. Start now and watch it grow.

Living a responsible financial life only takes a few well-developed habits practiced on a daily basis, and not from an overwhelming amount of technical knowledge. Personal finance is truly 80 percent behavior and only 20 percent knowledge. Ultimately, if we don’t take control of our finances now, someone else definitely will.

Author: Ronald Hatfield, former WVU Extension Financial Management Specialist
Last Reviewed: Pat Gruber, former WVU Extension Families and Health, September 2014